User acquisition costs fell 59% in January as developers backed off holiday spending, Fiksu says

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By Kathleen De Vere Comments

iOS user acquisition costs plummeted in January, falling from $1.81 to $1.14 per loyal user, a drop of 59 percent month-on-month according to Fiksu, a Boston-based company that helps developers find new users by mediating between ad networks.

The cost to acquire a loyal user (defined as one that opens an app three times) has not been this low since May of 2011, when the average cost was $1.10 per user.

Fiksu attributed the sharp decline in January marketing costs to developers shutting down their aggressive holiday marketing plans. Costs hit an all-time high in December as developers poured money into advertising to beat Apple’s annual App Store shutdown and ensure consumers were able to find their apps on Christmas Day, which turned out to be the single busiest day in history for app downloads.

While marketing costs decreased, download volumes continued to increase for the fifth month in a row. The top 200 free iPhone apps in the U.S. saw an average of 6.79 million daily downloads in January, a 12 percent increase over December’s previous record of 6.04 million downloads per day.

Although user acquisition costs are the lowest they’ve been in almost a year, prices may not rebound in February. On Jan. 31 Tapjoy cut its minimum bid to $0.10 and a week later Google switched AdMob to an AdWords style model, eliminating minimum bids and targeting fees altogether. Apple’s iAd, which was once marketed as a premium mobile advertising product has also slashed its minimum buy to as little as $5,000 for developers (not large brands, which reportedly have a minimum of around $100,000). Both Tapjoy and AdMob cited a mature marketplace as the reason behind their new pricing strategies at the Inside Social Apps conference earlier this month.

It also remains to be seen what the effect of Apple’s crackdown on download bots will have on Fiksu’s download index for next month. A long tolerated “open secret”, developers often used the service to propel their apps to the top of the free download charts.