Cost of Acquiring Users for Mobile Apps Goes Up Again Amid iPhone 4S Launch

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By Kim-Mai Cutler Comment

The cost to get a loyal user for a mobile app on the iOS platform jumped for a second consecutive month just as Apple launched the 4S.

Fiksu, a Boston-based company that mediates between different ways of getting users via mobile ad networks and incentivized installs, said the cost to get a “loyal” user rose to an all-time high in September. It jumped 10 cents to $1.64 in September as consumers held off on purchases of iPhones in anticipation of the latest model, the 4S, which came out at the beginning of this month. A “loyal” user is one who opens an app three times.

The reason these statistics are important is that virtually all of the largest free-to-play game developers have to use paid acquisition channels as a way to get new customers. Rising costs may mean that their profit margins are declining, which would hurt their valuations in the case of a funding or acquisition.

Downloads of free iOS apps among the ones ranked in the top 200 dropped for the third consecutive month to 3.8 million in September from 4.06 million in August. The rising costs and declining downloads probably have to do with anticipation of the iPhone 4S launch, which meant that fewer consumers opted to buy a brand-new iPhone in the month before the 4S. Fewer new iPhone purchases mean fewer new consumers exploring the app store for new content to download.

If this is the case, we should see a healthy bump in downloads in October. However, it’s not clear if this will mean a drop in user acquisition costs since giant mobile developers like Electronic Arts and Gameloft have run aggressive sales all month.

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