It’s really not that hard to acquire new users for your app. What’s hard is acquiring new users who will actually stick around long enough to add value. After all, on average, app installs only cost $2.31 to $4.05, depending on the ad format you’re buying. But when you layer in the fact that 87 percent of new users leave within seven days, and 94.5 percent leave within 30 days, things get a bit messier.
That means that even if you’re buying the very cheapest (fine, fine, “most cost effective”) ads — i.e., banner ads — it still costs you, best-case scenario, almost $18 to nab a user who will stick around for a week, and over $40 for a user who will still be using your app a month after the install. And that $40 doesn’t even buy you a guaranteed sale!
Think About Lifetime Value
So, what’s an app-focused retailer to do? One option, of course, is to use the average lifetime value (LTV) to determine acceptable cost per install (CPI) spend. In the example above, it makes sense to spend $2.31 per install only as long as your average LTV is higher than $40. Essentially, customer LTV sets your break-even point, above which you can expect to bring in more money than you spent acquiring the user.
This works pretty well for anyone who can consistently and accurately determine LTV, but for many retailers, that’s just not feasible. Fortunately, there’s another way to solve this problem that doesn’t rely on averages at all: the CPI+ model.
Why CPI+ is the Better Way
The CPI+ model, or “verified cost per install,” is a payment model that lets you pay not necessarily for app installs, but rather for confirmed, post-install engagement within your app. And the engagement can be whatever you choose — a purchase would be an obvious choice, but you can set the bar as low as an email signup or a certain amount of time spent in the app.
Once that pre-determined engagement has happened, you can release payment to whichever media source drove the install in the first place. And, of course, you can employ a hybrid model, paying a small amount for the install and a bigger bounty when the user takes your desired action.
The true value of the CPI+ model is essentially allowing you to “filter out” the low-value installs that would otherwise drive up your effective CPI. In the traditional CPI model, you still have to pay that $2.31 even if a user opens your app once, says “huh,” and uninstalls it. With a CPI+ model, you’re only paying to acquire users who engage in some meaningful way.
The Ultimate Solution
Now, the holy grail here is to track LTV and pay on CPI+. That gives you the best control over your margins and enables you to dynamically adjust the payout based on a specific user’s actual LTV. Consistent LTV tracking and CPI+ payouts do require finding tech partners that can support your needs — the scale of trying to do these things manually generally isn’t sustainable.
You’ll also want to be sure that you can give media sources transparent visibility into their performance, so they not only know they’re being fairly compensated, but also can take steps to optimize towards higher-LTV customers. This may incur some up-front cost, but it's worth the investment to acquire new, high-value app users in the most efficient and effective way.
Matt Moore is product marketing manager at Impact, the global leader in partnership automation and catalyst for the new partnership economy.
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Matt Moore is Product Marketing Manager at Impact, the global leader in Partnership Automation and catalyst for the new Partnership Economy. Impact accelerates enterprise growth by automating the full partnership lifecycle, including: discovery, recruitment, contracting, engagement, fraud protection, optimization and payment processing for enterprise partnerships.