five common freemium app marketing mistakes

Five common mistakes made in marketing freemium apps

Eric Benjamin SeufertIsrael Mobile Summit

June 10, 2014

StructureHow is Freemium different?How are

Mobile Games different?Mistake 1: Misunderstanding LTV

Mistake 2: Misunderstanding featuring

Mistake 3: Misunderstanding ad networks

Mistake 4: Misunderstanding CPI Mistake 5:

Misunderstanding chart dynamics

How is Freemium different?

How is Freemium different?What is freemium?

How is Freemium different?What is freemium?• 0 marginal cost of distribution

How is Freemium different?What is freemium?• 0 marginal cost of distribution• Low inherent conversion rate

How is Freemium different?What is freemium?• 0 marginal cost of distribution• Low inherent conversion rate• Large scale / large total addressable market

How is Freemium different?What is freemium?• 0 marginal cost of distribution• Low inherent conversion rate• Large scale / large total addressable market• Continuous monetization curve

How is Freemium different?What is freemium?• 0 marginal cost of distribution• Low inherent conversion rate• Large scale / large total addressable market• Continuous monetization curve• Minority of highly engaged users

How is Freemium different?How do freemium mobile products differ from paid mobile products?

How is Freemium different?

• No switching cost

How do freemium mobile products differ from paid mobile products?

How is Freemium different?

• No switching cost• LTV difficult to calculate

How do freemium mobile products differ from paid mobile products?

How is Freemium different?

• No switching cost• LTV difficult to calculate• Much larger potential audience (everyone can afford free)

How do freemium mobile products differ from paid mobile products?

How is Freemium different?

• No switching cost• LTV difficult to calculate• Much larger potential audience (everyone can afford free)• Network effects easier to achieve

How do freemium mobile products differ from paid mobile products?

How is Freemium different?

• No switching cost• LTV difficult to calculate• Much larger potential audience (everyone can afford free)• Network effects easier to achieve• Advertising not as abrasive

How do freemium mobile products differ from paid mobile products?

How is Freemium different?

• No switching cost• LTV difficult to calculate• Much larger potential audience (everyone can afford free)• Network effects easier to achieve• Advertising not as abrasive• Multiple points of monetization

How do freemium mobile products differ from paid mobile products?

How are Games different?How do mobile games differ from non-game consumer mobile products?

How are Games different?How do mobile games differ from non-game consumer mobile products? • Not action-driven / different use case

How are Games different?How do mobile games differ from non-game consumer mobile products? • Not action-driven / different use case• Demographic bifurcation

How are Games different?How do mobile games differ from non-game consumer mobile products? • Not action-driven / different use case• Demographic bifurcation• “Content” is different than “feature set”

How are Games different?How do mobile games differ from non-game consumer mobile products? • Not action-driven / different use case• Demographic bifurcation• “Content” is different than “feature set”• Longer development lead-times before launch

How are Games different?How do mobile games differ from non-game consumer mobile products? • Not action-driven / different use case• Demographic bifurcation• “Content” is different than “feature set”• Longer development lead-times before launch• No “network moats” / more susceptible to cloning

How are Games different?How do mobile games differ from non-game consumer mobile products? • Not action-driven / different use case• Demographic bifurcation• “Content” is different than “feature set”• Longer development lead-times before launch• No “network moats” / more susceptible to cloning• Well-defined, perennial “archetypes”

How are Games different?How do mobile games differ from non-game consumer mobile products? • Not action-driven / different use case• Demographic bifurcation• “Content” is different than “feature set”• Longer development lead-times before launch• No “network moats” / more susceptible to cloning• Well-defined, perennial “archetypes”• Long history for comparison

StructureHow is Freemium different?How are

Mobile Games different?Mistake 1: Misunderstanding LTV

Mistake 2: Misunderstanding featuring

Mistake 3: Misunderstanding ad networks

Mistake 4: Misunderstanding CPI Mistake 5:

Misunderstanding chart dynamics

Misunderstanding LTVWhat is Lifetime Customer Value (LTV)?

Misunderstanding LTVWhat is Lifetime Customer Value (LTV)?• Present value of future cash flows from user

Misunderstanding LTVWhat is Lifetime Customer Value (LTV)?• Present value of future cash flows from user• What individual user can be expected to pay

Misunderstanding LTVWhat is Lifetime Customer Value (LTV)?• Present value of future cash flows from user• What individual user can be expected to pay• Can be aggregated over various dimensions (demographic

characteristics / early user behavior)

Misunderstanding LTVWhat is Lifetime Customer Value (LTV)?• Present value of future cash flows from user• What individual user can be expected to pay• Can be aggregated over various dimensions (demographic

characteristics / early user behavior)• Marketing metric

Misunderstanding LTVWhat is Lifetime Customer Value NOT?

Misunderstanding LTVWhat is Lifetime Customer Value NOT?Linear*.

*usually. An LTV evolution curve could theoretically be linear.

Misunderstanding LTVWhat is Lifetime Customer Value NOT?Linear*.

*usually. An LTV evolution curve could theoretically be linear.

Misunderstanding LTVWhat is Lifetime Customer Value NOT?Linear*.

*usually. An LTV evolution curve could theoretically be linear.

Misunderstanding LTVWhat is Lifetime Customer Value NOT?Immediate.

Misunderstanding LTVWhat is Lifetime Customer Value NOT?Immediate.

180-day LTV =

Misunderstanding LTVWhat is Lifetime Customer Value NOT?Immediate.

180-day LTV =

Pay $CPI

Day 0

Misunderstanding LTVWhat is Lifetime Customer Value NOT?Immediate.

180-day LTV =

Pay $CPI

Day 0 Day 180

Recoup $LTV

Misunderstanding LTVWhat is Lifetime Customer Value NOT?Immediate.

180-day LTV =

Pay $CPI

Day 0 Day 180

Recoup $LTV

(More on this topic: http://bit.ly/2MLTV)

Misunderstanding LTVWhat is Lifetime Customer Value NOT?Upper limit that can be spent on per-user acquisition.

Misunderstanding LTVWhat is Lifetime Customer Value NOT?Upper limit that can be spent on per-user acquisition.

Marketing Profit = LTV - CPI

Misunderstanding LTVWhat is Lifetime Customer Value NOT?Upper limit that can be spent on per-user acquisition.

Marketing Profit = LTV – CPI

Operating Profit = LTV – CPI – Everything Else

StructureHow is Freemium different?How are

Mobile Games different?Mistake 1: Misunderstanding LTV

Mistake 2: Misunderstanding featuring

Mistake 3: Misunderstanding ad networks

Mistake 4: Misunderstanding CPI Mistake 5:

Misunderstanding chart dynamics

Misunderstanding FeaturingWhat is Platform Featuring?

Misunderstanding FeaturingWhat is Platform Featuring?• Free publicity given by a platform to a specific app

Misunderstanding FeaturingWhat is Platform Featuring?• Free publicity given by a platform to a specific app• A source of free installs for said apps

Misunderstanding FeaturingWhat is Platform Featuring NOT?Charity.

Misunderstanding FeaturingWhat is Platform Featuring NOT?A winning lottery ticket.

Misunderstanding FeaturingWhat is Platform Featuring NOT?Guaranteed.

Misunderstanding FeaturingWhat is Platform Featuring NOT?Guaranteed.

StructureHow is Freemium different?How are

Mobile Games different?Mistake 1: Misunderstanding LTV

Mistake 2: Misunderstanding featuring

Mistake 3: Misunderstanding ad networks

Mistake 4: Misunderstanding CPI Mistake 5:

Misunderstanding chart dynamics

Misunderstanding Ad NetworksWhat is a Mobile Ad Network?

Misunderstanding Ad NetworksWhat is a Mobile Ad Network?• An intermediary between publishers and advertisers

Misunderstanding Ad NetworksWhat is a Mobile Ad Network?• An intermediary between publishers and advertisers• A technology platform that facilitates the sale of ad

impressions

Misunderstanding Ad NetworksWhat is a Mobile Ad Network NOT?

Misunderstanding Ad NetworksWhat is a Mobile Ad Network NOT?Frictionless / cost free.

Misunderstanding Ad NetworksWhat is a Mobile Ad Network NOT?A source of infinite inventory.

Misunderstanding Ad NetworksWhat is a Mobile Ad Network NOT?A source of infinite inventory.

Misunderstanding Ad NetworksWhat is a Mobile Ad Network NOT?A source of infinite inventory.

Installs Purchased

Misunderstanding Ad NetworksWhat is a Mobile Ad Network NOT?A source of infinite inventory.

CPI

Installs Purchased

Misunderstanding Ad NetworksWhat is a Mobile Ad Network NOT?Accessing inventory that no other network is accessing (necessarily).

StructureHow is Freemium different?How are

Mobile Games different?Mistake 1: Misunderstanding LTV

Mistake 2: Misunderstanding featuring

Mistake 3: Misunderstanding ad networks

Mistake 4: Misunderstanding CPI Mistake 5:

Misunderstanding chart dynamics

Misunderstanding CPIWhat is Cost Per Install?• The average price paid for a mobile app install

Misunderstanding CPIWhat is Cost Per Install NOT?A price that is set by an ad network.

Misunderstanding CPI

CPI = / CTR / IRCPM1000

Misunderstanding CPI

CPI =

Market-based

/ CTR / IRCPM1000

Misunderstanding CPI

CPI =

Product / Creative dependent

CPM1000 / CTR / IR

Market-based

Misunderstanding CPIWhat is Cost Per Install NOT?Constant over time.

Misunderstanding CPIWhat is Cost Per Install NOT?An indicator of “quality” / how much user will spend.

StructureHow is Freemium different?How are

Mobile Games different?Mistake 1: Misunderstanding LTV

Mistake 2: Misunderstanding featuring

Mistake 3: Misunderstanding ad networks

Mistake 4: Misunderstanding CPI Mistake 5:

Misunderstanding chart dynamics

What are Chart Dynamics?

Misunderstanding Chart Dynamics

What are Chart Dynamics?• The interplay between chart position (top downloaded / top

grossing) and app visibility

Misunderstanding Chart Dynamics

What are Chart Dynamics?• The interplay between chart position (top downloaded / top

grossing) and app visibility• The ability for an app developer to offset per-user marketing

losses with additional “organic” installs

Misunderstanding Chart Dynamics

What are Chart Dynamics NOT?The same for every app.

Misunderstanding Chart Dynamics

What are Chart Dynamics NOT?A substitute for a quality product.

Misunderstanding Chart Dynamics

What are Chart Dynamics NOT?A substitute for a quality product.

In a chart push…

Misunderstanding Chart Dynamics

What are Chart Dynamics NOT?A substitute for a quality product.

In a chart push…

Profit = Marketing Cost – ( LTVacquired * UsersAcquired + LTVorganic * UsersChart )

Misunderstanding Chart Dynamics

Misunderstanding Chart DynamicsWhat are Chart Dynamics NOT?A substitute for a quality product.

In a chart push…

Profit = Marketing Cost – ( LTVacquired * UsersAcquired + LTVorganic * UsersChart )

If LTVs are low, may be impossible to get enough users from chart position to offset marketing cost.

What are Chart Dynamics NOT?Sustainable at a constant CPI.

Misunderstanding Chart Dynamics

Freemium Economics

Mobile Dev Memo

http://FreemiumEconomics.com

http://MobileDevMemo.com

Questions?