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appstore

[Also published on Medianama]

It has been only five years since the launch of the iPhone App Store in July 2008.  Feels like fifty dog years.  In reality this is not a long time, compared to nearly twenty years since the launches of Yahoo (February 1994), Amazon (July 1995) and the IPO of Netscape (August 1995).  Over these twenty years, not only have startups innovated on product/design and business models and but also on demand generation/user acquisition strategies.  Yet only five years after the launch of the App Store, the pace of innovation in mobile app user acquisition seems to have hit a brick wall… in the search for increasingly efficient methods of marketing, we seemed to have hit the efficient frontier.

In India, efficient user acquisition is a key problem area for developers targeting Indian users as well as global users.  Fortunately, marketing has gone online, along with placement, onboarding, monetization and payments. And mobile marketing can be done at world-class levels right in India.

So, what is this efficient frontier? What are the best practices for mobile user acquisition?

To provide some concrete pointers,  I organized several founders-only sessions on enterprise/SMB SaaS user acquisition as well as mobile user acquisition in Bangalore, Delhi and Mumbai. This month, I also organized and moderated a session on mobile user acquisition with TIE in Delhi.  Our eminent panelists included Harinder Takhar (CEO of PayTM), Pathik Shah (Head of Growth, Hike), Jamshed Rajan (Chief Product Officer, Nimbuzz) and Chandan Gupta (founder/CEO of PhoneWarrior).

So here’s a summary of what we discussed – please note the tone of the conversation was more around hacks and learnings from practitioners as opposed to some over-arching strategic viewpoint on mobile user acquisition.  Many of these tips fall into the non-scalable bucket but some are more scalable. I will leave it up to you to decide which is which.  Also, it was assumed that developers were tracking efficiency of marketing campaigns and funnels through some form of app instrumentation, whether through commercial solutions like Mixpanel, Apsalar, Flurry, Google Analytics etc or home-grown analytics.

CONVENTIONAL PRE-MOBILE TECHNIQUES

These include traditional PR/media outreach, analyst relations, direct selling and tradeshows/conferences.  These techniques are fairly inefficient and out-of-date for mobile apps as most target users/consumers are not reached through these means.

Blogs/websites: Chasing Techcrunch and other tech blogs does not have nearly the same effect it had a few years ago – previously, a post on Techcrunch could drive 50-100k visitors/downloads – now, this number is down to 100-500 downloads.

Vernacular newspapers: Targeting vernacular media outlets across India, as opposed to the English and Hindi dailies could provide some advantage. Regional language papers are hungry for technology news and can be quite effective in reaching regional audiences.

Localization: On a related note, for some apps, it makes sense to provide app store listings in several different languages, sometimes backed up by the product being localized as well but not necessarily.

TV: In India, it could be useful to get onto NDTV Cell Guru and other such shows.  These media outlets also have Facebook, web, mobile and video assets to drive awareness.

Print: Some panelists had tried this. It does not have any meaningful impact on mobile app downloads.

Offline: Some panelists had tried stationing people on campus to get some initial adoption. It does not work and the message gets diluted/warped when temporary employees are hired to do this.

MOBILE 1.0 TECHNIQUES

These include OEM/mobile operator distribution, mobile advertising and search engine optimization (SEO).

A basic deterrent is app size – especially in Tier 2 towns and beyond, people are wary of downloading apps greater than 10MB in size.  Really need to minimize app size.

Factory loading: Average OEM/carrier deals take 5-6 months at least and have to be positioned as helping the OEM/operator differentiate. Most OEMs are now looking at apps/services as revenue streams so this should be baked into the business case for them, perhaps as a rev-share.  Some panelists mentioned Rs 5-10 per install as what Indian OEMs are asking for.

If the app is already factory-loaded onto the product, this doesn’t drive activation either – factory-loading has to be on the homescreen and accompanied by an above-the-line marketing campaign (e.g. advertising or logo on device box) preferably paid for and driven by the operator/OEM.

Some of the smaller/newer OS/OEMs providers are being more aggressive in courting developers. These include Tizen, Intel, Amazon, and Blackberry.  If you build your app for these, you will maybe get an advantage and may get paid to build out on their platform. The flip-side, however, is that these platforms have small audiences and will most probably not drive a meaningful amount of downloads/usage.  Panelists mentioned Parag Gupta at Amazon, Annie Mathew at Blackberry and Priyam Bose at Microsoft/Windows.

Mobile advertising: General consensus is that users acquired through paid advertising tend to be less loyal than users acquired organically.  One exception may be advertising to users of competitor apps on Facebook and the use of promoted posts on FB. Panelists mentioned Google/Admob, Inmobi, Flurry, Tapjoy, Yieldmo, HasOffers etc.

Mobile advertising gets an initial burst of downloads to move up into the top rankings on the app stores and then some drip marketing is required to keep rankings high.  Some people expressed an opinion that any burst marketing should be done on one day rather than over several days and perhaps should be done on a Friday so the boost in rankings persists over the weekend.  The key is to get into the top 10.

One needs 100k-200k installs per day to get into the top of the charts in India. Can’t get there through paid advertising.  Advertising is not cheap.  Especially given the messaging wars between Line, WeChat, Whatsapp, Hike and others, mobile inventory seems to be sold out in India.

If you measure real CPI (i.e. CPI taking into account successful download rates, activiation rates and 3 or 6 month churn), actual cost of customer acquisition (CAC) ends up 4-10x as high as CPI quoted by ad networks. In India, iPhone CPIs are under Rs 120 ($2) and Android Rs 30 ($0.50) at low scale.

There are mediation layers from Flurry, Hasoffers, Mopub and others available so that developers don’t have to integrate multiple ad network SDKs into their apps.  All these SDK providers have their own ad networks but also connect with other ad networks. Meanwhile, publishers use SSPs to route between ad networks. It’s a complete spaghetti-like mess.

Incentivized downloads: Tapjoy/Flurry used to provide this but have moved away from this. Panelists urged developers to not even think about trying incentivized downloads as CPIs are high as are uninstall rates, given that users are downloading without any intent to use.

Search engine optimization: Most developers mentioned that web SEO did not work for them.  Content on the web does not bring traffic from the web to the app stores.  Some people mentioned content marketing e.g. blog posts and posting presentations on Slideshare as a way to drive some traffic.

Mobile web: Make sure you have a http://get.yourwebsiteURL.com mobile-optimized website up and running.  Apple and Android have special HTML widgets to include here that you insert once you know the OS of the device (through the header). These widgets redirect to the relevant app in the relevant app store.

Social media is not very effective for user growth. It is somewhat effective for engaging existing users as well as a support channel.  Adding social network sharing within apps does generate some virality, especially if sharing is encouraged at points within the app where users get a delightful experience.  Apps with social as their core may benefit from Facebook, including automated actions posting to Facebook (e.g. ‘read’ or ‘play’).

Virality:  Startups should track their k-factor/viral-factor and viral cycle time.  Even a k-factor of 0.2 really helps if it can be sustained over several months/years.  A viral factor anywhere close to or greater than 1 is phenomenal but can only be sustained for a short period of time.

MOBILE 2.0 TECHNIQUES

App store optimization (ASO): The panel talked about platform stores (like Google Play, iOS App Store, Blackberry App World and Amazon), indie stores (like Getjar, Opera, UCWeb and Appia) and operator portals/stores. Most indie stores have a paid/sponsorship model but CPIs are the same as ad networks.

Platform app stores require carefully crafted keywords (repeated in title and description), creative content (which is mostly only read by loyal users), quality screenshots/logos and a good demo video for Google Play (linked through Youtube). Do not to go overboard here e.g. do not stuff keywords in the title/description – you will look desperate.  Best tools for ASO include Google Trends, Searchman SEO, AppCodes.  Reverse engineer the search algorithms on the app stores by typing in keyworks to see output of apps appearance.

Getting featured is obviously great but is driven purely through relationships (for Apple and Amazon) and algorithmically (for Google Play) with the curation teams for each platform, sometimes on a geography-by-geography basis.  Always make sure to comply with the design guidelines provided by each platform – this makes it more likely you will get picked up for featuring. Use AppFigures and Appannie to track your performance and reviews.

App updates also drive additional downloads and push up ranking for a short period of time.  Since there are no well-proven A/B testing methods for mobile apps, it makes sense to try several variations with each app update.

Cross-promotion: Companies like Outfit7, Zynga and Google have very effectively used their large network of apps to cross-promote new app launches. Outfit7 has been able to get to one billion+ downloads and has cross-promoted new launches to tens of millions of downloads in a few weeks.

Barter: Many developers don’t think about this, perhaps because it only applies when their apps get to some scale (several million MAUs). The trick is to find mobile app properties that (1) have tens of millions of MAUs; (2) have users in demographics/regions that you are targeting; and (3) have a large proportion of unsold or remnant inventory i.e. low sell-through rates.  Bilaterally trading this remnant inventory can then be quite an efficient, not to mention cashless, way of driving downloads.

Referral schemes: Virality can be driven through incentives that provide an individual relevant app-specific user benefits in inviting people successfully. Examples include Hike (free SMSs for each successful invite), Dropbox (additional storage for each successful invite), Evernote (one month of free premium service with each successful invite) and Paypal ($5-10 for each successful invite).  These schemes do not work for single-user utilities if you hand out real money.  Users will try to hack around this system.

Beyond a certain point, only word-of-mouth/virality works, can’t use paid. This does not apply necessarily in the case of apps where the lifetime value (LTV) of an average user has been quantified, as can be done with many user-paid models like games, ecommerce and subscription services.

UNCONVENTIONAL TECHNIQUES

Use social influencers: If you can identify and target social influencers, it sometimes works to make them proponents of your app.

Gamification: Leaderboard-based incentivization does not impact new user acquisition.  Make sure that gamification works even if the user does not have any friends using the same app.

Push SMS marketing: CPIs end up being within 25% of where the ad networks are, so not much different in price.  Historically, SMSs went out to non-data, non-smartphone users as well so were not effective.  This can contribute to cheapening the brand. Also, TRAI has specifically banned sending spam SMSs to users on the DND list.

Restricted invite lists: This is what Mailbox did, as have many others.  A permanent beta is a less extreme example of this. This make sense for apps like email which need to be scaled up slowly given their complexity.  However, restricted invite lists only make some sense when there is a lot of PR and noise generated some other way to drive artificial scarcity.

Review sites: At small scale, this helps. Some developers pepper comments throughout review sites such as Appolicious, AppTurbo and AppBrain to drive some downloads.  This also build links into the developer’s website to drive Google search rankings.

(Source: kenteegardin)

We have been thinking through how to start and build large mobile B2C businesses, with an eye toward the megatrend of mobile that is slowly building here in India.   Megatrend-wise, the number of mobile internet users in India has grown rapidly (60-100M mobile web users depending on who you believe in) and that trend is likely to continue.

While this megatrend is creating an opportunity to build mobile-first B2C businesses, the lack of monetization methods is a big problem. Stumbling blocks include lack of depth in micro-payment platforms (outside of telcos) and a rather small mobile advertising market.

I believe that mobile-first startups need to keep gross burn low while iterating fast toward product-market fit –  there are two key metrics which I feel need to be optimized early-on and are lead indicators of the value that a business in this space can create:

  1. Customer acquisition cost (CAC) associated with a fast growing user base
  2. Engagement within the acquired user base

How to drive lower customer acquisition cost:

Low B2C CAC for a quickly scaling user base can mean one or more of the following:

  • You have hit a need gap that might have a large market.
  • Your product cuts through the clutter and provides an offering much better than competition / substitutes.
  • Strong virality or word of mouth referrals which come from a wow consumer experience and/or a well designed social product.

Typically, cost of acquisition needs to be compared against the revenue or lifetime value of a user, but given monetization will take longer in India, absolute low customer acquisition costs are important for the business to grow and sustain. Dhingana, a Lightspeed-backed music streaming service on web and mobile, for instance has spent a minimal amount on above-the-line marketing and has reached several million monthly active users.

What if your customer acquisition costs are not low?

  • Initial customer acquisition costs for new products are typically high. As you refine the product, channels and communication costs should improve.  So have a plan for driving down blended (over non-paid and paid channels) CAC.
  • Explore acquisition channels that are opening up now: A key driver of TripAdvisor’s success was its understanding of Google SEO much ahead of competition. Social and mobile channels are opening up now and some aspects aren’t yet saturated or very well understood. Take advantage of such channels. For example, Facebook recently launched its in-stream advertising and provides an opportunity because it isn’t very popular yet.
  • Think about alternate channels for customer acquisition (E.g. offline retailers for local oriented apps, banks for financial services, publishers for media content, etc.). However, ownership of the customer is always an issue with such channels.
  • Figure out monetization sooner, rather than purely growing the user base: Easier said than done, but you might want to identify market segments where there are customers that have a higher willingness-to-pay.

In essence, low customer acquisition cost is a key indicator of a large future user base.

How to drive higher engagement and retention:

After user base growth, engagement and retention are the key indicators of a business’ sustainability.

Poor retention is like a leaky bucket. There is no way you can create or hold value if your service is unable to retain customers. Retention (% of users that continue to use your service) after three months of activation is a widely accepted engagement metric. Flurry recently reported an average retention of 35% after three months of registration across a large base of apps. If you don’t know which side of this average your retention is, you are blind to one of the most important aspects of building a mobile business. A few points to keep in mind when using the above average as a benchmark:

  • The nature of your business impacts retention. Flurry’s own data shows the extremes, such as finance apps which average retention of 10%, while news/sports could be as high as 50% after three months. This does not mean you should change your business, but have the perspective when you are benchmarking your business.
  • If your user base includes a large mix of older platforms like Symbian (especially in India), then expect your average to be lower than the global average, which has a large mix of iOS that is likely to have better experience and thus retention.
  • Finally, this retention number is from developers who cared to install such a measurement tool. Many developers who didn’t would likely be at a lower retention for their applications.

More frequent use of your service makes it more valuable. Flurry reports average usage frequency of ~4 times per week within its sample. The use of game mechanics and notifications are approaches to building engagement. Foursquare is perhaps one of the leading examples in driving engagement through gamification. Tools such as Urban Airship, Badgeville, Bigdoor and Xtify could be useful to use here.

Start tracking engagement metrics as soon as you launch your service. Use tools such as MixPanel, Flurry, Apsalar, Kissmetrics to measure funnels and cohorts. Define core, casual and inactive users, and measure movement between these categories against weekly and monthly targets.

Delivering on these metrics will lead to monetization and sustainability over time:

Drive high engagement today to create valuable users for future: Eventually, a portion of users who you engage could pay for the service. If the service is providing enough value, people in India jump through quite a few hoops to find a way to pay. IRCTC (~20M monthly transactions) and online tax filing (15 M in 2010-11) are great examples of at scale online transactions.

Focus on building engaged user base for better ad-monetization: Overall, there is far more mobile ad inventory in India than there is demand from advertisers. Thus, a business that stands out in terms of user engagement and has an identity within its user base will attract ad budgets. For instance a strong sports-oriented platform could find youth-oriented brands as its takers. iPad has a strong identity and engagement within its user base and ads on iPad in India go at ~Rs 1000 CPM and there is always demand for more. On the contrary, if you are one more provider of mobile inventory, then you are likely to be used for performance campaigns with poor fill-rates and low CPMs.

Good performance is self-sustaining: Your performance on app stores as well as likelihood of getting featured on one improve if you have organic traction (low CAC) and have high engagement. Android for instance optimizes search results based on retention metrics of apps.

More monetization options are becoming available, albeit slowly:

Existing VAS business models are being challenged: While the above two metrics don’t apply as sharply to existing mobile VAS businesses that are monetizing through operator relationships, the wind  is certainly blowing in the direction that they would need to start thinking about these metrics as well (TRAI’s regulations and TDSAT’s recent ruling in TRAI’s favour).

Payments through telcos is a matter of time (could be long though): Given the circumstances, telcos are opening up to being a payment channel (and getting paid like one) where the mobile business is responsible for customer acquisition. Vodafone is already selectively allowing B2C businesses to keep 60-70% of the revenue that is being collected by Vodafone from users that were acquired directly by the B2C business. More on this in Dev’s post.

More payment options are opening up: There are more efforts underway at app-stores (Rupee payments at Google Play and iOS App Store, OVI/Blackberry integrating with Airtel/Vodafone billing gateways). There are also other ongoing efforts like mobile/online wallets and integration of telcos under a single payment solution which will all lead to a much more favorable payments ecosystem for mobile B2C businesses as they come into market.

Mobile advertising is getting organized: The mobile advertising ecosystem in India is firming up with multiple players from ad-networks (InMobi, Komli, Vserv) to media-buyers (Ad2C, Madhouse) setting up dedicated teams for the Indian market. Brands are already experimenting with mobile even though the budgets are small today. It is still a long way to go, but if smartphone penetration continues to grow, then mobile could very well be the largest targeted digital rich media platform available to a brand manager.

These are still early days and it is a long haul, but if you are building a mobile-first B2C business and focusing on the metrics above, there is a path to meaningful value creation.

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