Five common mistakes made in
marketing freemium apps
Eric Benjamin Seufert
Israel Mobile Summit
June 10, 2014
Who am I?
Who am I?
Freemium Economics
Who am I?
Freemium Economics
Head of Marketing at Wooga
Who am I?
Freemium Economics
Head of Marketing at Wooga
Mobile Dev Memo
Structure
How is
Freemium different?How are
Mobile Games different?
Mistake 1:
Misunderstanding LTV
Mistake 2:
Misundersta...
How is Freemium different?
How is Freemium different?
What is freemium?
How is Freemium different?
What is freemium?
• 0 marginal cost of distribution
How is Freemium different?
What is freemium?
• 0 marginal cost of distribution
• Low inherent conversion rate
How is Freemium different?
What is freemium?
• 0 marginal cost of distribution
• Low inherent conversion rate
• Large scal...
How is Freemium different?
What is freemium?
• 0 marginal cost of distribution
• Low inherent conversion rate
• Large scal...
How is Freemium different?
What is freemium?
• 0 marginal cost of distribution
• Low inherent conversion rate
• Large scal...
How is Freemium different?
How do freemium mobile products differ from paid
mobile products?
How is Freemium different?
• No switching cost
How do freemium mobile products differ from paid
mobile products?
How is Freemium different?
• No switching cost
• LTV difficult to calculate
How do freemium mobile products differ from pa...
How is Freemium different?
• No switching cost
• LTV difficult to calculate
• Much larger potential audience (everyone can...
How is Freemium different?
• No switching cost
• LTV difficult to calculate
• Much larger potential audience (everyone can...
How is Freemium different?
• No switching cost
• LTV difficult to calculate
• Much larger potential audience (everyone can...
How is Freemium different?
• No switching cost
• LTV difficult to calculate
• Much larger potential audience (everyone can...
How are Games different?
How do mobile games differ from non-game
consumer mobile products?
How are Games different?
How do mobile games differ from non-game
consumer mobile products?
• Not action-driven / differen...
How are Games different?
How do mobile games differ from non-game
consumer mobile products?
• Not action-driven / differen...
How are Games different?
How do mobile games differ from non-game
consumer mobile products?
• Not action-driven / differen...
How are Games different?
How do mobile games differ from non-game
consumer mobile products?
• Not action-driven / differen...
How are Games different?
How do mobile games differ from non-game
consumer mobile products?
• Not action-driven / differen...
How are Games different?
How do mobile games differ from non-game
consumer mobile products?
• Not action-driven / differen...
How are Games different?
How do mobile games differ from non-game
consumer mobile products?
• Not action-driven / differen...
Structure
How is
Freemium different?How are
Mobile Games different?
Mistake 1:
Misunderstanding LTV
Mistake 2:
Misundersta...
Misunderstanding LTV
What is Lifetime Customer Value (LTV)?
Misunderstanding LTV
What is Lifetime Customer Value (LTV)?
• Present value of future cash flows from user
Misunderstanding LTV
What is Lifetime Customer Value (LTV)?
• Present value of future cash flows from user
• What individu...
Misunderstanding LTV
What is Lifetime Customer Value (LTV)?
• Present value of future cash flows from user
• What individu...
Misunderstanding LTV
What is Lifetime Customer Value (LTV)?
• Present value of future cash flows from user
• What individu...
Misunderstanding LTV
What is Lifetime Customer Value NOT?
Misunderstanding LTV
What is Lifetime Customer Value NOT?
Linear*.
*usually. An LTV evolution curve could theoretically be...
Misunderstanding LTV
What is Lifetime Customer Value NOT?
Linear*.
*usually. An LTV evolution curve could theoretically be...
Misunderstanding LTV
What is Lifetime Customer Value NOT?
Linear*.
*usually. An LTV evolution curve could theoretically be...
Misunderstanding LTV
What is Lifetime Customer Value NOT?
Immediate.
Misunderstanding LTV
What is Lifetime Customer Value NOT?
Immediate.
180-day LTV =
Misunderstanding LTV
What is Lifetime Customer Value NOT?
Immediate.
180-day LTV =
Pay $CPI
Day 0
Misunderstanding LTV
What is Lifetime Customer Value NOT?
Immediate.
180-day LTV =
Pay $CPI
Day 0 Day 180
Recoup $LTV
Misunderstanding LTV
What is Lifetime Customer Value NOT?
Immediate.
180-day LTV =
Pay $CPI
Day 0 Day 180
Recoup $LTV
(Mor...
Misunderstanding LTV
What is Lifetime Customer Value NOT?
Upper limit that can be spent on per-user acquisition.
Misunderstanding LTV
What is Lifetime Customer Value NOT?
Upper limit that can be spent on per-user acquisition.
Marketing...
Misunderstanding LTV
What is Lifetime Customer Value NOT?
Upper limit that can be spent on per-user acquisition.
Marketing...
Structure
How is
Freemium different?How are
Mobile Games different?
Mistake 1:
Misunderstanding LTV
Mistake 2:
Misundersta...
Misunderstanding Featuring
What is Platform Featuring?
Misunderstanding Featuring
What is Platform Featuring?
• Free publicity given by a platform to a specific app
Misunderstanding Featuring
What is Platform Featuring?
• Free publicity given by a platform to a specific app
• A source o...
Misunderstanding Featuring
What is Platform Featuring NOT?
Charity.
Misunderstanding Featuring
What is Platform Featuring NOT?
A winning lottery ticket.
Misunderstanding Featuring
What is Platform Featuring NOT?
Guaranteed.
Misunderstanding Featuring
What is Platform Featuring NOT?
Guaranteed.
Structure
How is
Freemium different?How are
Mobile Games different?
Mistake 1:
Misunderstanding LTV
Mistake 2:
Misundersta...
Misunderstanding Ad Networks
What is a Mobile Ad Network?
Misunderstanding Ad Networks
What is a Mobile Ad Network?
• An intermediary between publishers and advertisers
Misunderstanding Ad Networks
What is a Mobile Ad Network?
• An intermediary between publishers and advertisers
• A technol...
Misunderstanding Ad Networks
What is a Mobile Ad Network NOT?
Misunderstanding Ad Networks
What is a Mobile Ad Network NOT?
Frictionless / cost free.
Misunderstanding Ad Networks
What is a Mobile Ad Network NOT?
A source of infinite inventory.
Misunderstanding Ad Networks
What is a Mobile Ad Network NOT?
A source of infinite inventory.
Misunderstanding Ad Networks
What is a Mobile Ad Network NOT?
A source of infinite inventory.
Installs
Purchased
Misunderstanding Ad Networks
What is a Mobile Ad Network NOT?
A source of infinite inventory.
CPI
Installs
Purchased
Misunderstanding Ad Networks
What is a Mobile Ad Network NOT?
Accessing inventory that no other network is accessing
(nece...
Structure
How is
Freemium different?How are
Mobile Games different?
Mistake 1:
Misunderstanding LTV
Mistake 2:
Misundersta...
Misunderstanding CPI
What is Cost Per Install?
• The average price paid for a mobile app install
Misunderstanding CPI
What is Cost Per Install NOT?
A price that is set by an ad network.
Misunderstanding CPI
CPI = / CTR / IRCPM
1000
Misunderstanding CPI
CPI =
Market-based
/ CTR / IRCPM
1000
Misunderstanding CPI
CPI =
Product / Creative dependent
CPM
1000
/ CTR / IR
Market-based
Misunderstanding CPI
What is Cost Per Install NOT?
Constant over time.
Misunderstanding CPI
What is Cost Per Install NOT?
An indicator of “quality” / how much user will spend.
Structure
How is
Freemium different?How are
Mobile Games different?
Mistake 1:
Misunderstanding LTV
Mistake 2:
Misundersta...
What are Chart Dynamics?
Misunderstanding Chart Dynamics
What are Chart Dynamics?
• The interplay between chart position (top downloaded / top
grossing) and app visibility
Misunde...
What are Chart Dynamics?
• The interplay between chart position (top downloaded / top
grossing) and app visibility
• The a...
What are Chart Dynamics NOT?
The same for every app.
Misunderstanding Chart Dynamics
What are Chart Dynamics NOT?
A substitute for a quality product.
Misunderstanding Chart Dynamics
What are Chart Dynamics NOT?
A substitute for a quality product.
In a chart push…
Misunderstanding Chart Dynamics
What are Chart Dynamics NOT?
A substitute for a quality product.
In a chart push…
Profit =
Marketing Cost – ( LTVacquired ...
Misunderstanding Chart Dynamics
What are Chart Dynamics NOT?
A substitute for a quality product.
In a chart push…
Profit =...
What are Chart Dynamics NOT?
Sustainable at a constant CPI.
Misunderstanding Chart Dynamics
Freemium Economics
Mobile Dev Memo
http://FreemiumEconomics.com
http://MobileDevMemo.com
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Five common mistakes made in marketing freemium apps

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As presented at the Israel Mobile Summit 2014 by:
Eric Seufert, Wooga Games
http://www.israelmobilesummit.com

Published in: Technology, Business
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  • Diversification key to keeping overall prices low
  • Means per-network LTV may not really indicate anything / be left completely to chance on a given day
    Some networks do access inventory exclusively
  • Means per-network LTV may not really indicate anything / be left completely to chance on a given day
    Some networks do access inventory exclusively
  • Whats the interplay between scale, user acquisition, and profit?

    Cost Per Install
  • Pure function of supply and demand
  • Dependent on ad creatives used to promote the game
  • The most likely users to download your app do so the first time they see an ad
    Reaching subsequent users takes multiple ad viewings, which increases the price paid on CPM
    Reaching users after that may require refreshing creatives
  • This is dependent on the game
    High CPI might correlate with better-targeted ads / more engaging ad formats / countries with higher average per-user spend, but that doesn’t guarantee anything with respect to individual behavior
  • Being number 1 in one week doesn’t necessarily guarantee the same number of installs as #1 the week before it. Likewise, some weeks are more competitive than others and reqiure higher install #s to reach top 10
  • If LTV is low, no amount of “free” app installs may be able to offset cost of marketing
  • CPI will increase dramatically while spending at a loss because most suitable users are being acquired quickly
    Rate of change of CPI is faster when large quantities of users need to be acquired
  • Five common mistakes made in marketing freemium apps

    1. 1. Five common mistakes made in marketing freemium apps Eric Benjamin Seufert Israel Mobile Summit June 10, 2014
    2. 2. Who am I?
    3. 3. Who am I? Freemium Economics
    4. 4. Who am I? Freemium Economics Head of Marketing at Wooga
    5. 5. Who am I? Freemium Economics Head of Marketing at Wooga Mobile Dev Memo
    6. 6. Structure How is Freemium different?How are Mobile Games different? Mistake 1: Misunderstanding LTV Mistake 2: Misunderstanding featuring Mistake 3: Misunderstanding ad networks Mistake 4: Misunderstanding CPI Mistake 5: Misunderstanding chart dynamics
    7. 7. How is Freemium different?
    8. 8. How is Freemium different? What is freemium?
    9. 9. How is Freemium different? What is freemium? • 0 marginal cost of distribution
    10. 10. How is Freemium different? What is freemium? • 0 marginal cost of distribution • Low inherent conversion rate
    11. 11. How is Freemium different? What is freemium? • 0 marginal cost of distribution • Low inherent conversion rate • Large scale / large total addressable market
    12. 12. How is Freemium different? What is freemium? • 0 marginal cost of distribution • Low inherent conversion rate • Large scale / large total addressable market • Continuous monetization curve
    13. 13. How is Freemium different? What is freemium? • 0 marginal cost of distribution • Low inherent conversion rate • Large scale / large total addressable market • Continuous monetization curve • Minority of highly engaged users
    14. 14. How is Freemium different? How do freemium mobile products differ from paid mobile products?
    15. 15. How is Freemium different? • No switching cost How do freemium mobile products differ from paid mobile products?
    16. 16. How is Freemium different? • No switching cost • LTV difficult to calculate How do freemium mobile products differ from paid mobile products?
    17. 17. How is Freemium different? • No switching cost • LTV difficult to calculate • Much larger potential audience (everyone can afford free) How do freemium mobile products differ from paid mobile products?
    18. 18. How is Freemium different? • No switching cost • LTV difficult to calculate • Much larger potential audience (everyone can afford free) • Network effects easier to achieve How do freemium mobile products differ from paid mobile products?
    19. 19. How is Freemium different? • No switching cost • LTV difficult to calculate • Much larger potential audience (everyone can afford free) • Network effects easier to achieve • Advertising not as abrasive How do freemium mobile products differ from paid mobile products?
    20. 20. How is Freemium different? • No switching cost • LTV difficult to calculate • Much larger potential audience (everyone can afford free) • Network effects easier to achieve • Advertising not as abrasive • Multiple points of monetization How do freemium mobile products differ from paid mobile products?
    21. 21. How are Games different? How do mobile games differ from non-game consumer mobile products?
    22. 22. How are Games different? How do mobile games differ from non-game consumer mobile products? • Not action-driven / different use case
    23. 23. How are Games different? How do mobile games differ from non-game consumer mobile products? • Not action-driven / different use case • Demographic bifurcation
    24. 24. How are Games different? How do mobile games differ from non-game consumer mobile products? • Not action-driven / different use case • Demographic bifurcation • “Content” is different than “feature set”
    25. 25. How are Games different? How do mobile games differ from non-game consumer mobile products? • Not action-driven / different use case • Demographic bifurcation • “Content” is different than “feature set” • Longer development lead-times before launch
    26. 26. How are Games different? How do mobile games differ from non-game consumer mobile products? • Not action-driven / different use case • Demographic bifurcation • “Content” is different than “feature set” • Longer development lead-times before launch • No “network moats” / more susceptible to cloning
    27. 27. How are Games different? How do mobile games differ from non-game consumer mobile products? • Not action-driven / different use case • Demographic bifurcation • “Content” is different than “feature set” • Longer development lead-times before launch • No “network moats” / more susceptible to cloning • Well-defined, perennial “archetypes”
    28. 28. How are Games different? How do mobile games differ from non-game consumer mobile products? • Not action-driven / different use case • Demographic bifurcation • “Content” is different than “feature set” • Longer development lead-times before launch • No “network moats” / more susceptible to cloning • Well-defined, perennial “archetypes” • Long history for comparison
    29. 29. Structure How is Freemium different?How are Mobile Games different? Mistake 1: Misunderstanding LTV Mistake 2: Misunderstanding featuring Mistake 3: Misunderstanding ad networks Mistake 4: Misunderstanding CPI Mistake 5: Misunderstanding chart dynamics
    30. 30. Misunderstanding LTV What is Lifetime Customer Value (LTV)?
    31. 31. Misunderstanding LTV What is Lifetime Customer Value (LTV)? • Present value of future cash flows from user
    32. 32. Misunderstanding LTV What is Lifetime Customer Value (LTV)? • Present value of future cash flows from user • What individual user can be expected to pay
    33. 33. Misunderstanding LTV What is Lifetime Customer Value (LTV)? • Present value of future cash flows from user • What individual user can be expected to pay • Can be aggregated over various dimensions (demographic characteristics / early user behavior)
    34. 34. Misunderstanding LTV What is Lifetime Customer Value (LTV)? • Present value of future cash flows from user • What individual user can be expected to pay • Can be aggregated over various dimensions (demographic characteristics / early user behavior) • Marketing metric
    35. 35. Misunderstanding LTV What is Lifetime Customer Value NOT?
    36. 36. Misunderstanding LTV What is Lifetime Customer Value NOT? Linear*. *usually. An LTV evolution curve could theoretically be linear.
    37. 37. Misunderstanding LTV What is Lifetime Customer Value NOT? Linear*. *usually. An LTV evolution curve could theoretically be linear.
    38. 38. Misunderstanding LTV What is Lifetime Customer Value NOT? Linear*. *usually. An LTV evolution curve could theoretically be linear.
    39. 39. Misunderstanding LTV What is Lifetime Customer Value NOT? Immediate.
    40. 40. Misunderstanding LTV What is Lifetime Customer Value NOT? Immediate. 180-day LTV =
    41. 41. Misunderstanding LTV What is Lifetime Customer Value NOT? Immediate. 180-day LTV = Pay $CPI Day 0
    42. 42. Misunderstanding LTV What is Lifetime Customer Value NOT? Immediate. 180-day LTV = Pay $CPI Day 0 Day 180 Recoup $LTV
    43. 43. Misunderstanding LTV What is Lifetime Customer Value NOT? Immediate. 180-day LTV = Pay $CPI Day 0 Day 180 Recoup $LTV (More on this topic: http://bit.ly/2MLTV)
    44. 44. Misunderstanding LTV What is Lifetime Customer Value NOT? Upper limit that can be spent on per-user acquisition.
    45. 45. Misunderstanding LTV What is Lifetime Customer Value NOT? Upper limit that can be spent on per-user acquisition. Marketing Profit = LTV - CPI
    46. 46. Misunderstanding LTV What is Lifetime Customer Value NOT? Upper limit that can be spent on per-user acquisition. Marketing Profit = LTV – CPI Operating Profit = LTV – CPI – Everything Else
    47. 47. Structure How is Freemium different?How are Mobile Games different? Mistake 1: Misunderstanding LTV Mistake 2: Misunderstanding featuring Mistake 3: Misunderstanding ad networks Mistake 4: Misunderstanding CPI Mistake 5: Misunderstanding chart dynamics
    48. 48. Misunderstanding Featuring What is Platform Featuring?
    49. 49. Misunderstanding Featuring What is Platform Featuring? • Free publicity given by a platform to a specific app
    50. 50. Misunderstanding Featuring What is Platform Featuring? • Free publicity given by a platform to a specific app • A source of free installs for said apps
    51. 51. Misunderstanding Featuring What is Platform Featuring NOT? Charity.
    52. 52. Misunderstanding Featuring What is Platform Featuring NOT? A winning lottery ticket.
    53. 53. Misunderstanding Featuring What is Platform Featuring NOT? Guaranteed.
    54. 54. Misunderstanding Featuring What is Platform Featuring NOT? Guaranteed.
    55. 55. Structure How is Freemium different?How are Mobile Games different? Mistake 1: Misunderstanding LTV Mistake 2: Misunderstanding featuring Mistake 3: Misunderstanding ad networks Mistake 4: Misunderstanding CPI Mistake 5: Misunderstanding chart dynamics
    56. 56. Misunderstanding Ad Networks What is a Mobile Ad Network?
    57. 57. Misunderstanding Ad Networks What is a Mobile Ad Network? • An intermediary between publishers and advertisers
    58. 58. Misunderstanding Ad Networks What is a Mobile Ad Network? • An intermediary between publishers and advertisers • A technology platform that facilitates the sale of ad impressions
    59. 59. Misunderstanding Ad Networks What is a Mobile Ad Network NOT?
    60. 60. Misunderstanding Ad Networks What is a Mobile Ad Network NOT? Frictionless / cost free.
    61. 61. Misunderstanding Ad Networks What is a Mobile Ad Network NOT? A source of infinite inventory.
    62. 62. Misunderstanding Ad Networks What is a Mobile Ad Network NOT? A source of infinite inventory.
    63. 63. Misunderstanding Ad Networks What is a Mobile Ad Network NOT? A source of infinite inventory. Installs Purchased
    64. 64. Misunderstanding Ad Networks What is a Mobile Ad Network NOT? A source of infinite inventory. CPI Installs Purchased
    65. 65. Misunderstanding Ad Networks What is a Mobile Ad Network NOT? Accessing inventory that no other network is accessing (necessarily).
    66. 66. Structure How is Freemium different?How are Mobile Games different? Mistake 1: Misunderstanding LTV Mistake 2: Misunderstanding featuring Mistake 3: Misunderstanding ad networks Mistake 4: Misunderstanding CPI Mistake 5: Misunderstanding chart dynamics
    67. 67. Misunderstanding CPI What is Cost Per Install? • The average price paid for a mobile app install
    68. 68. Misunderstanding CPI What is Cost Per Install NOT? A price that is set by an ad network.
    69. 69. Misunderstanding CPI CPI = / CTR / IRCPM 1000
    70. 70. Misunderstanding CPI CPI = Market-based / CTR / IRCPM 1000
    71. 71. Misunderstanding CPI CPI = Product / Creative dependent CPM 1000 / CTR / IR Market-based
    72. 72. Misunderstanding CPI What is Cost Per Install NOT? Constant over time.
    73. 73. Misunderstanding CPI What is Cost Per Install NOT? An indicator of “quality” / how much user will spend.
    74. 74. Structure How is Freemium different?How are Mobile Games different? Mistake 1: Misunderstanding LTV Mistake 2: Misunderstanding featuring Mistake 3: Misunderstanding ad networks Mistake 4: Misunderstanding CPI Mistake 5: Misunderstanding chart dynamics
    75. 75. What are Chart Dynamics? Misunderstanding Chart Dynamics
    76. 76. What are Chart Dynamics? • The interplay between chart position (top downloaded / top grossing) and app visibility Misunderstanding Chart Dynamics
    77. 77. What are Chart Dynamics? • The interplay between chart position (top downloaded / top grossing) and app visibility • The ability for an app developer to offset per-user marketing losses with additional “organic” installs Misunderstanding Chart Dynamics
    78. 78. What are Chart Dynamics NOT? The same for every app. Misunderstanding Chart Dynamics
    79. 79. What are Chart Dynamics NOT? A substitute for a quality product. Misunderstanding Chart Dynamics
    80. 80. What are Chart Dynamics NOT? A substitute for a quality product. In a chart push… Misunderstanding Chart Dynamics
    81. 81. What are Chart Dynamics NOT? A substitute for a quality product. In a chart push… Profit = Marketing Cost – ( LTVacquired * UsersAcquired + LTVorganic * UsersChart ) Misunderstanding Chart Dynamics
    82. 82. Misunderstanding Chart Dynamics What are Chart Dynamics NOT? A substitute for a quality product. In a chart push… Profit = Marketing Cost – ( LTVacquired * UsersAcquired + LTVorganic * UsersChart ) If LTVs are low, may be impossible to get enough users from chart position to offset marketing cost.
    83. 83. What are Chart Dynamics NOT? Sustainable at a constant CPI. Misunderstanding Chart Dynamics
    84. 84. Freemium Economics Mobile Dev Memo http://FreemiumEconomics.com http://MobileDevMemo.com
    85. 85. Questions?
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