Five common mistakes made in marketing freemium apps

Five common mistakes made in marketing freemium apps

Eric Benjamin SeufertIsrael 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

StructureHow 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

How is Freemium different?


What is freemium?


What is freemium?• 0 marginal cost of distribution


What is freemium?• 0 marginal cost of distribution• Low inherent conversion rate


What is freemium?• 0 marginal cost of distribution• Low inherent conversion rate• Large scale / large total addressable market


What is freemium?• 0 marginal cost of distribution• Low inherent conversion rate• Large scale / large total addressable market• Continuous monetization curve


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


How do freemium mobile products differ from paid mobile products?


• No switching cost



• No switching cost• LTV difficult to calculate



• No switching cost• LTV difficult to calculate• Much larger potential audience (everyone can afford free)



• No switching cost• LTV difficult to calculate• Much larger potential audience (everyone can afford free)• Network effects easier to achieve



• No switching cost• LTV difficult to calculate• Much larger potential audience (everyone can afford free)• Network effects easier to achieve• Advertising not as abrasive



• 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 are Games different?

How do mobile games differ from non-game consumer mobile products?


How do mobile games differ from non-game consumer mobile products? • Not action-driven / different use case


How do mobile games differ from non-game consumer mobile products? • Not action-driven / different use case• Demographic bifurcation


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”


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


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


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”


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

Misunderstanding LTV

What is Lifetime Customer Value (LTV)?


What is Lifetime Customer Value (LTV)?• Present value of future cash flows from user


What is Lifetime Customer Value (LTV)?• Present value of future cash flows from user• What individual user can be expected to pay


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)


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


What is Lifetime Customer Value NOT?


What is Lifetime Customer Value NOT?Linear*.

*usually. An LTV evolution curve could theoretically be linear.


What is Lifetime Customer Value NOT?Immediate.



180-day LTV =



180-day LTV =

Pay $CPI

Day 0



180-day LTV =

Pay $CPI

Day 0 Day 180

Recoup $LTV



180-day LTV =

Pay $CPI

Day 0 Day 180

Recoup $LTV

(More on this topic: http://bit.ly/2MLTV)


What is Lifetime Customer Value NOT?Upper limit that can be spent on per-user acquisition.



Marketing Profit = LTV - CPI



Marketing Profit = LTV – CPI

Operating Profit = LTV – CPI – Everything Else

Misunderstanding Featuring

What is Platform Featuring?


What is Platform Featuring?• Free publicity given by a platform to a specific app


What is Platform Featuring?• Free publicity given by a platform to a specific app• A source of free installs for said apps


What is Platform Featuring NOT?Charity.


What is Platform Featuring NOT?A winning lottery ticket.


What is Platform Featuring NOT?Guaranteed.

Misunderstanding Ad Networks

What is a Mobile Ad Network?


What is a Mobile Ad Network?• An intermediary between publishers and advertisers


What is a Mobile Ad Network?• An intermediary between publishers and advertisers• A technology platform that facilitates the sale of ad

impressions


What is a Mobile Ad Network NOT?


What is a Mobile Ad Network NOT?Frictionless / cost free.


What is a Mobile Ad Network NOT?A source of infinite inventory.



Installs Purchased



CPI

Installs Purchased


What is a Mobile Ad Network NOT?Accessing inventory that no other network is accessing (necessarily).

Misunderstanding CPI

What is Cost Per Install?• The average price paid for a mobile app install


What is Cost Per Install NOT?A price that is set by an ad network.


CPI = / CTR / IRCPM1000


CPI =

Market-based

/ CTR / IRCPM1000


CPI =

Product / Creative dependent

CPM1000

/ CTR / IR

Market-based


What is Cost Per Install NOT?Constant over time.


What is Cost Per Install NOT?An indicator of “quality” / how much user will spend.

What are Chart Dynamics?

Misunderstanding Chart Dynamics

What are Chart Dynamics?• The interplay between chart position (top downloaded / top

grossing) and app visibility


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


What are Chart Dynamics NOT?The same for every app.


What are Chart Dynamics NOT?A substitute for a quality product.



In a chart push…



In a chart push…

Profit = Marketing Cost – ( LTVacquired * UsersAcquired + LTVorganic * UsersChart )




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.

What are Chart Dynamics NOT?Sustainable at a constant CPI.


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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