What is user acquisition cost and how to assess it
In the whole process of running a mobile app’s business, everything goes through the user acquisition activity: it’s fundamental to elaborate a user acquisition strategy, and its efficiency depends mostly on user acquisition cost.
User Acquisition Cost for mobile apps is defined as the total expense to acquire new mobile app users. It’s calculated by dividing the total amount of money spent in user acquisition by the number of new users acquired. It is an important metric to track for businesses as it can help determine the profitability of their marketing campaign.
To track costs of user acquisition’s campaign, two alternative metrics are often used, CPI and CPA, depending on the targeted goals.
· CPI (Cost Per Install): advertisers paid a fixed or dynamic fee for every app install generated by that specific ads campaign;
· CPA (Cost Per Action): advertisers pay fees only when a user performs a specific action inside the app after installing the app; the action can be a registration, a subscription or an in-app purchase, which is very common in video games.
CPI is considered the most common pricing model between the two, especially in gaming app’s market, because it allows for fast optimization and scaling large amount of new users; to give an example, the cost per install vary between category changing from $1.40 per install in shopping app to $3.78 per install for gaming app (Mobile App Marketing Strategy for 2024, Mapendo).
Instead, CPA is a more advanced pricing model for UA, as it focuses on the quality of acquired new users rather than just the quantity of new users.
Both pricing model have their advantages and disadvantages speaking about user acquisition cost for mobile apps, depending primarily on what monetization strategy the app developers want to run; some of the most important factors to consider are for example:
· The app’s category (non gaming, gaming, shopping, etc)
· Targeted audience and market
· Budget available
· Expected LTV and ROI of the users
- Why it’s important to know your mobile app user acquisition cost
- What affects user acquisition cost for mobile apps?
- App user acquisition cost by platform
- App user acquisition cost by country
- App user acquisition cost by app category
It's fundamental for advertisers in the mobile application world to know precisely the user acquisition’s cost for mobile apps. Money spent in user acquisition and more generally in advertisements are growing over and over again: as said by Data.ai reports, global mobile ad spend were 362 Billion Dollars in 2023 and it’s predicted to be around $402 Billion by 2024.
User acquisition cost helps measure the return on investment (ROI) of your user acquisition campaign; ROI is the ratio of the profit generated by your app to the cost of acquiring new users. To calculate the Return On Investment of your marketing operation, it’s mandatory for you to know your user acquisition costs for mobile apps and revenue-related metrics such as the ARPU and LTV.
Every mobile app marketing goal is to achieve a positive ROI, meaning that your LifeTimeValue is higher than your User Acquisition Cost (UAC); to do so, either revenue-per-user must be increased or cost-per-user must be reduced (or both luckily).
Tracking and analyzing your User Acquisition Cost for mobile apps allow you to effectively identify channels, platforms, countries and app’s category perfect for your mobile app’s advertising; in addition you can manage and allocate your budget cleverly.
ARPU (Average Revenue Per User) is defined as the amount of revenue generated by each active user on a specific given period of time, it tells you how much value each user brings to your app in the short term; it is calculated by dividing the total revenue by the number of active users.
LTV (LifeTime Value) is defined as the estimated net profit attributed to the future relationship with the user and it tells you how much value each user brings to you mobile app in the long term; there are various way to calculate LTV and it is often a predictable value calculated from predictable analysis’ software based on in-app users’ actions.
Comparing the user acquisition cost for mobile apps with metrics such as ARPU and LTV, you can evaluate the effectiveness and sustainability of your UA strategy. In the perfect scenario, you want your user acquisition cost for mobile apps to be lower than your ARPU and LTV, meaning that you are spending less to acquire new users than how much they are worth for you inside the mobile app.
Several factors intricately influence the User Acquisition Cost (UAC) for mobile apps, making it a dynamic and multifaceted metric: platform choice, geographical location and app category play significant roles in determining the overall cost for UA.
Firstly, the platform choice significantly impacts UAC, with variations observed between iOS and Android. Advertising costs on the Apple App Store may differ markedly from those on the Google Play Store, necessitating tailored strategies for each platform. User acquisition campaigns for IOS users tend to be more expensive than other platforms because they are believed to have stronger purchasing powers than Android’s users, becoming more expensive users to acquire.
Secondly, geographical location plays a pivotal role, as user acquisition cost for mobile apps can vary substantially from one country to another. Developed markets often exhibit higher UAC due to heightened competition and greater market saturation, while emerging markets may present cost-effective acquisition opportunities. Everythings is explained by the variance of ROI from one country to another.
Lastly, the app category itself can heavily influence the user acquisition cost for mobile apps, reflecting the competitiveness of specific genres. Highly competitive categories, such as gaming or finance, may demand higher UAC, requiring developers to allocate more resources to stand out. Conversely, apps in less competitive or niche categories may find more cost-effective acquisition options.
A clear understanding of these factors empowers developers to adapt their user acquisition strategies, optimize budgets and navigate the intricacies of UAC across platforms, countries, and app categories for maximum effectiveness.
App User Acquisition Cost (UAC) for mobile apps varies significantly based on the platform, with iOS and Android showcasing distinct dynamics in the competitive landscape. Each platform presents its own set of challenges and opportunities, influencing the overall cost of acquiring new users.
For iOS, the App Store is renowned for its stringent review process and premium user base, resulting in higher advertising costs. In contrast, Android's Google Play Store caters to a broader user demographic, often translating to lower acquisition costs. Developers must navigate these differences strategically, understanding that the intricacies of user behavior, preferences, and competition contribute to the platform-specific UAC. Mapendo’s report analysis on the ROI from IOS and from Android is a demonstration on what has been said over: the ROI for IOS is 156.45%, while the ROI for Android is 120.25%
Moreover, the choice between iOS and Android can depend on the app's target audience, monetization model and overall business goals. A thorough understanding of the distinct characteristics of each platform enables developers to allocate resources effectively, optimize marketing strategies, and ensure a clever use of budgets, ultimately enhancing the overall efficiency for lowering the most user acquisition cost for mobile apps and maximizing revenue.
App User Acquisition Cost (UAC) for mobile apps varies significantly also by one country to another, reflecting different user behaviors, economic conditions, and market dynamics. Developed countries often exhibit higher UAC due to increased competition and a more saturated app market. For instance, advertising costs in the United States or Western European countries are generally higher compared to emerging markets, and in Mapendo’s report there is an analysis of the specific CPI across different countries.
On the other side, emerging markets, with their rapidly growing smartphone user base, may offer more cost-effective user acquisition opportunities. Factors such as local preferences, cultural connotation and economic disparities contribute to the variability in user acquisition cost for mobile apps across countries.
A strategic approach to user acquisition cost for mobile apps should involve considering regional differences and tailoring marketing efforts to align with specific market conditions. By understanding the features of UAC by country, developers can make smart decisions about resource allocation, optimize their advertising strategies and ensure that their user acquisition efforts are not only cost-effective but also aligned with the specific characteristics of each target market.
App User Acquisition Cost (UAC) for mobile apps is also significantly influenced by app category, reflecting the level of competition and user engagement within specific genres.
Highly competitive categories, such as apps for gaming or finance, often require larger advertising budgets due to the saturation and intense competition for user attention. In these categories, acquiring users may be more challenging, as developers strive to stand out in a crowded market.
Conversely, apps in niche or less competitive categories may experience lower user acquisition cost, as the pool of potential users is more accessible. Developers must carefully assess the unique dynamics of their app category and align it accordingly with their user acquisition strategies. To give a clear example related to CPI in Mapendo’s report, mobile games’ apps pay $3.78 per install while others like betting or dating apps pay more than twice the amount per install.
Understanding the intricacies of user acquisition cost for mobile apps by one category to another, allows developers to set realistic expectations. Doing so, they can also allocate resources effectively and refine their marketing approaches to suit the specific challenges they have to face and opportunities posed by their app's category. Ultimately, a tailored and category-specific user acquisition strategy enhances the efficiency and effectiveness of acquiring users within a competitive and diverse app market.
Comprehending User Acquisition Costs for mobile apps is imperative for developers seeking sustainable success in a competitive market such as the mobile app market. By distinguishing between CPI and CPA, developers can tailor their strategies to align with specific goals.
Understanding the interplay between acquisition costs, revenue-related metrics, and factors like platform, country, and app category empowers developers to make informed decisions, optimize budgets, and maximize the ROI of their mobile apps. In this intricate landscape, a feature and data-driven approach is fundamental to navigating the complexities of user acquisition cost for mobile apps and ensuring the long-term viability of your mobile app.