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Five common freemium app marketing mistakes

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Five common freemium app marketing mistakes

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Five common freemium app marketing mistakes

  1. 1. Five common mistakes made in marketing freemium apps Eric Benjamin Seufert Israel Mobile Summit June 10, 2014
  2. 2. 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
  3. 3. How is Freemium different?
  4. 4. How is Freemium different? What is freemium?
  5. 5. How is Freemium different? What is freemium? • 0 marginal cost of distribution
  6. 6. How is Freemium different? What is freemium? • 0 marginal cost of distribution • Low inherent conversion rate
  7. 7. How is Freemium different? What is freemium? • 0 marginal cost of distribution • Low inherent conversion rate • Large scale / large total addressable market
  8. 8. 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
  9. 9. 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
  10. 10. How is Freemium different? How do freemium mobile products differ from paid mobile products?
  11. 11. How is Freemium different? • No switching cost How do freemium mobile products differ from paid mobile products?
  12. 12. How is Freemium different? • No switching cost • LTV difficult to calculate How do freemium mobile products differ from paid mobile products?
  13. 13. 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?
  14. 14. 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?
  15. 15. 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?
  16. 16. 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?
  17. 17. How are Games different? How do mobile games differ from non-game consumer mobile products?
  18. 18. How are Games different? How do mobile games differ from non-game consumer mobile products? • Not action-driven / different use case
  19. 19. How are Games different? How do mobile games differ from non-game consumer mobile products? • Not action-driven / different use case • Demographic bifurcation
  20. 20. 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”
  21. 21. 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
  22. 22. 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
  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 • “Content” is different than “feature set” • Longer development lead-times before launch • No “network moats” / more susceptible to cloning • Well-defined, perennial “archetypes”
  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” • Longer development lead-times before launch • No “network moats” / more susceptible to cloning • Well-defined, perennial “archetypes” • Long history for comparison
  25. 25. 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
  26. 26. Misunderstanding LTV What is Lifetime Customer Value (LTV)?
  27. 27. Misunderstanding LTV What is Lifetime Customer Value (LTV)? • Present value of future cash flows from user
  28. 28. Misunderstanding LTV What is Lifetime Customer Value (LTV)? • Present value of future cash flows from user • What individual user can be expected to pay
  29. 29. 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)
  30. 30. 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
  31. 31. Misunderstanding LTV What is Lifetime Customer Value NOT?
  32. 32. Misunderstanding LTV What is Lifetime Customer Value NOT? Linear*. *usually. An LTV evolution curve could theoretically be linear.
  33. 33. Misunderstanding LTV What is Lifetime Customer Value NOT? Linear*. *usually. An LTV evolution curve could theoretically be linear.
  34. 34. Misunderstanding LTV What is Lifetime Customer Value NOT? Linear*. *usually. An LTV evolution curve could theoretically be linear.
  35. 35. Misunderstanding LTV What is Lifetime Customer Value NOT? Immediate.
  36. 36. Misunderstanding LTV What is Lifetime Customer Value NOT? Immediate. 180-day LTV =
  37. 37. Misunderstanding LTV What is Lifetime Customer Value NOT? Immediate. 180-day LTV = Pay $CPI Day 0
  38. 38. Misunderstanding LTV What is Lifetime Customer Value NOT? Immediate. 180-day LTV = Pay $CPI Day 0 Day 180 Recoup $LTV
  39. 39. 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)
  40. 40. Misunderstanding LTV What is Lifetime Customer Value NOT? Upper limit that can be spent on per-user acquisition.
  41. 41. Misunderstanding LTV What is Lifetime Customer Value NOT? Upper limit that can be spent on per-user acquisition. Marketing Profit = LTV - CPI
  42. 42. 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
  43. 43. 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
  44. 44. Misunderstanding Featuring What is Platform Featuring?
  45. 45. Misunderstanding Featuring What is Platform Featuring? • Free publicity given by a platform to a specific app
  46. 46. Misunderstanding Featuring What is Platform Featuring? • Free publicity given by a platform to a specific app • A source of free installs for said apps
  47. 47. Misunderstanding Featuring What is Platform Featuring NOT? Charity.
  48. 48. Misunderstanding Featuring What is Platform Featuring NOT? A winning lottery ticket.
  49. 49. Misunderstanding Featuring What is Platform Featuring NOT? Guaranteed.
  50. 50. Misunderstanding Featuring What is Platform Featuring NOT? Guaranteed.
  51. 51. 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
  52. 52. Misunderstanding Ad Networks What is a Mobile Ad Network?
  53. 53. Misunderstanding Ad Networks What is a Mobile Ad Network? • An intermediary between publishers and advertisers
  54. 54. 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
  55. 55. Misunderstanding Ad Networks What is a Mobile Ad Network NOT?
  56. 56. Misunderstanding Ad Networks What is a Mobile Ad Network NOT? Frictionless / cost free.
  57. 57. Misunderstanding Ad Networks What is a Mobile Ad Network NOT? A source of infinite inventory.
  58. 58. Misunderstanding Ad Networks What is a Mobile Ad Network NOT? A source of infinite inventory.
  59. 59. Misunderstanding Ad Networks What is a Mobile Ad Network NOT? A source of infinite inventory. Installs Purchased
  60. 60. Misunderstanding Ad Networks What is a Mobile Ad Network NOT? A source of infinite inventory. CPI Installs Purchased
  61. 61. Misunderstanding Ad Networks What is a Mobile Ad Network NOT? Accessing inventory that no other network is accessing (necessarily).
  62. 62. 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
  63. 63. Misunderstanding CPI What is Cost Per Install? • The average price paid for a mobile app install
  64. 64. Misunderstanding CPI What is Cost Per Install NOT? A price that is set by an ad network.
  65. 65. Misunderstanding CPI CPI = / CTR / IRCPM 1000
  66. 66. Misunderstanding CPI CPI = Market-based / CTR / IRCPM 1000
  67. 67. Misunderstanding CPI CPI = Product / Creative dependent CPM 1000 / CTR / IR Market-based
  68. 68. Misunderstanding CPI What is Cost Per Install NOT? Constant over time.
  69. 69. Misunderstanding CPI What is Cost Per Install NOT? An indicator of “quality” / how much user will spend.
  70. 70. 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
  71. 71. What are Chart Dynamics? Misunderstanding Chart Dynamics
  72. 72. What are Chart Dynamics? • The interplay between chart position (top downloaded / top grossing) and app visibility Misunderstanding Chart Dynamics
  73. 73. 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
  74. 74. What are Chart Dynamics NOT? The same for every app. Misunderstanding Chart Dynamics
  75. 75. What are Chart Dynamics NOT? A substitute for a quality product. Misunderstanding Chart Dynamics
  76. 76. What are Chart Dynamics NOT? A substitute for a quality product. In a chart push… Misunderstanding Chart Dynamics
  77. 77. 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
  78. 78. 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.
  79. 79. What are Chart Dynamics NOT? Sustainable at a constant CPI. Misunderstanding Chart Dynamics
  80. 80. Freemium Economics Mobile Dev Memo http://FreemiumEconomics.com http://MobileDevMemo.com
  81. 81. Questions?

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