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iPhone App Marketing Costs Creep Upward

Startup says new product rumors are to blame
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One of the common complaints from smartphone application developers is the problem of discovery—how to make something stand out among the hundreds of thousands of apps available in Apple's App Store. And that problem has been getting more challenging over the past few months, according to new data from a startup called Fiksu.

The company helps app developers acquire users, and it says its customers include Gilt Groupe, TuneWiki, and Ask.com. Based on the apps that use Fiksu, the company releases data on the general trends in app downloads and marketing through a monthly report that it calls the Fiksu Index. Fiksu says that marketing costs have reached their highest point since it started tracking these numbers in May.

Specifically, Fiksu says a company had to spend an average of $1.64 to acquire each loyal user (defined as someone who opens an app at least three times). That's up 6 percent from August, which was also up from July. The immediate cause? People just weren't downloading as many apps. Fiksu says the top 200 free iPhone apps in the U.S. were downloaded 3.8 million times in September, down from 4.06 million in August. With fewer downloads, developers and publishers were seeing less payoff for their marketing dollars.

The ultimate culprit, according to CEO Micah Adler, were consumers waiting for the new iPhone. Now that the iPhone 4S is on the market, Adler says downloads should pick up again, and there are already signs that that's the case.

On one hand, this seems like yet another way that developers are at the mercy of Apple. On the other, Apple isn't immune to these difficulties itself—the company blamed iPhone rumors (and the decision of consumers to wait for the new device) for sales numbers that fell short of analyst estimates.