This is a guest post by Josh Williams, President and CSO of Kontagent
Whether in the early stages of developing a mobile application, or already launched with a substantial user base, mobile app developers and marketers can gain a huge advantage and greater chance at success by looking at the way social app developers scientifically optimize their Customer LTV and ROI.
Over recent years, game developers and marketers on Facebook (as well as on other social platforms around the globe) have mastered the science of building and optimizing their games around customer data. They use that data to learn about what is and isn’t working in their applications. From Acquisition to Retention to Monetization (the three stages in the ARM Funnel), the successful developers have created entire organizations around data-driven design at each level, and across all facets of their businesses.
All successful studios publishing games on Facebook today, live and die by the ARM funnel. Insights garnered throughout the ARM funnel show where to focus resources and marketing investment. At its most basic level:
Acquisition: Figure out what audience performs best in your game and how to acquire members of that audience in the most effective, lowest-cost manner possible; from ads, to cross-promotions with other games, to install exchange networks, to viral channels. KPI’s = Cohort Customer Acquisition Cost (Cohort CAC); Cohort ARPU and Retention by Channel; Cohort ARPU and Retention by Campaign; Acquisition Conversion Funnel
Retention: Keep that audience engaged for as long as possible. Find fall-off points where users leave. Learn how to encourage sharing with friends. KPI’s = Avg. Session Length; Day 1 Retention, Day 7 Retention, Day 30 Retention; Custom Event Funnels; User Lifetime Event Distribution; K-Factor (virality)
Monetization: Get these users to pay and to keep paying over time, optimizing their lifetime values (LTV) to the greatest degree possible. KPI’s = % Paying Users; Avg. Revenue per User (ARPU); Avg. Revenue per Paying User (ARPPU); Purchase Conversion Event Funnel
Game studios like Zynga, Popcap, Crowdstar and Gaia have been able to acquire users more profitably when armed with a perpetual flow of data, and a supporting data science infrastructure with the expertise to act on this data and optimize their ARM funnel. Their teams of data scientists and developers measured, iterated, tested and optimized relentlessly to acquire even more users at better customer acquisition cost and with higher yield ratios than most.
As the free to play model grows and dominates in mobile, it is no surprise that the ARM funnel is the right framework for measuring Customer Economics and per-user profitability in mobile as well. Just like social app developers, mobile app developers need to understand and optimize acquisition, retention and monetization if they are going to succeed.
That said, mobile developers have a long way to go. And, as more social companies (including Zynga!) move aggressively to mobile, getting smart about data is increasingly important. At Kontagent, we believe those mobile developers who recognize the importance of data-driven app development throughout the ARM funnel will be well-positioned to lead the space.
Accordingly, here are the biggest challenges and opportunities facing mobile game developers, relative to measuring and optimizing around the tried-and-true ARM funnel.
Discovery & Acquisition
- The biggest hurdle is getting discovered and competing against companies with deep pockets who can muscle their way up the app store rankings.
- Mobile ad networks are massively fragmented and difficult to target high-yielding cohorts of users (either through behavioral or demographic segmentation)
- Understanding ROI (on iOS in particular, tracking from ad/source to install to monetization used to be impossible)
- Reach large audiences at a relatively inexpensive cost basis by advertising on cross-promotional networks and partnering with other developers with high DAU counts
- Segment users by acquisition channel, and optimize around those producing the highest per user ROI. Analytics make it possible to see differences between each source: Organic, Viral, Cross-Promotion & Advertising.
- Build a great, highly engaging game! The better the experience, the more players will tell their friends. Word-of-mouth is a huge organic driver of installs for mobile devs right now, so focus on gameplay, and reap the benefits. Use analytics to tell you where users are losing interest in your app.
Engagement & Retention
- Although testing & iterating is how social devs have found success on Facebook, rapid iteration is not so easy or fluid on mobile platforms like iOS. It can take from 3 days to 2 weeks to receive approval for each new version from the app store, making it difficult to optimize on the fly.
- Many users don’t update their apps regularly, resulting in outdated, or “dirty,” data from the combination of “old” and “new” app version users. This makes it challenging to iterate and improve your app based on user data without being misled, unless your data tools easily filter users by app version.
- Design the app to use data-driven backend systems to control user experience in-app when a connection is available on the device. This way, developers can dynamically tweak play balance, economy balance, etc., and then perform split-testing to further optimize Customer Economics.
- Use an analytics solution that allows filtering data by app version, location and device type (for Android). This is very important in addressing the “dirty data” issue, and in determining which platforms and devices to commit time, effort and resources to.
- The free-to-use model proliferating on the app store provides customers a risk-free opportunity to experience an application, which in turn provides app developers with free insights into their virtual economies and player incentives to gain the most effective conversion rates.
- Users on Android are still experiencing more friction in payments, resulting in lower ARPU (average revenue per user) and lower monetization rates in general.
- To gauge the quality of users, developers need insight into the in-app behavior of their paying users, which marketing channel they came in from, and ultimately how profitable their customers are by each marketing channel on an ROI basis.
- Developers need tools to monetize players that may not make in-app purchases.
- Optimize game mechanics that encourage purchasing, while balancing engagement. Use analytics to see how the two play out using custom event tracking and funnels.
- Individually track each and every revenue channel, from In App Purchase to advertising yields, understanding the best price points, for-sale item mix and conversion funnels – ultimately using data to understand and optimize the economy underlying the game.
- Employ messaging tactics to remain connected with users on new features / offers like push notifications and email. Often times re-engaged users will monetize at a higher rate if the user experience is tweaked and re-targeted to them.
To summarize, the way to think about user behavior and customer economics optimization is very similar in mobile and social. Social developers have honed this complex system to a science, with the ARM funnel as the underlying analytics framework. Mobile brings its own unique challenges to the mix as outlined above. However, despite these unique challenges, the underlying principles are precisely the same, and mobile developers would be well served by learning all they can, as quickly as possible, both from the best application operators in mobile and from their cousins on the social web.
by Josh Williams, President and CSO of Kontagent
Image: Oleksiy Mark via Shutterstock