December 4, 2014 by Dennis Mink

Cost-per-Install: The Astonishingly Mediocre Metric Mobile Marketers Love [and Hate] To Use

performance_large_singleEvery company with an app these days seems to be running paid mobile app install campaigns. I can’t go a day without seeing an ad on my phone encouraging me to install an app. Sometimes I bite and go for it. When I do, I usually take a quick 15 second look before deciding if I want to keep the app to check out later. If I can’t figure out how to use it or just don’t see the value in the app, it’s gone. A press and hold of the jiggly app icon and off it goes into the big app trash can in the sky.

As a marketer, I cannot help but think about how much companies spend to get people to install their apps, only to see their apps deleted so soon after installing. How much money did they spend on my install? What was their CPI? $2? $5? $10?

According to VentureBeat, most users acquired via CPI are of astonishingly low-value. Over two-thirds of the users acquired via CPI have a sub-$10 life-time value (LTV), and almost one in six have profitability-dooming LTV of precisely zero. (Read more). Ouch! As the app space becomes more competitive (hard to believe, right?) and the cost-per-install continues to rise, the problem for marketers will only get worse.

 

The Rise of the CPI

The cost-per-install (CPI) is an interesting metric. For mobile marketers, it is the metric du jour. It’s easy to understand and, with some effort, can be optimized. Facebook, Twitter and Google support it, as do a handful of the RTB exchanges and mobile ad networks. But CPI is also misleading. It’s pretty much at the top of the funnel – one small step below an impression – and is not a good indicator of a successful mobile app marketing campaign. Success usually comes further down the funnel and involves an action a user takes that is considered of high value, like buying a t-shirt, booking a flight or sharing a photo.

Most apps have even longer funnels, where the user must go through a few steps (like creating a profile, or registering their credit card) before they can even begin making purchases or interacting with the app socially. The install is simply the first step a user takes as they begin getting to know your app.

To align your marketing objectives with goals further down the funnel, you will want to establish a cost-per-action (CPA) for the more meaningful and profitable post-install events. Simply divide the total ad spend by post-install events attributed to the paid media.

If you can attribute installs by ad network, app categories, ad type or anything else meaningful in some way, this can help direct you — to some extent — on where to spend additional ad dollars. But given the massively large volume of data produced by mobile campaigns and tracking limitations on mobile, it often requires a dedicated User Acquisition or CRM team to optimize app install campaigns on a CPA basis. And very few companies I’ve met have the extra resources to manage this effectively.

 

Look Beyond the CPI

So what are we as marketers to do? As the cost of installs increases, we need to get a lot smarter with how we spend our marketing dollars and invest them into campaigns designed to drive more profitable post-install actions. Fortunately, the mobile marketing space is evolving rapidly, creating new opportunities to move beyond simply buying installs. It’s just a matter of time until we can choose a specific post-install event we buy our media against. And instead of paying on a cost-per-install, we will pay on a cost-per-action. Liftoff provides this type of service now — run CPA-optimized mobile app install campaigns to drive specific post-install actions further down the funnel. But this has been our focus from day one. As of today, the companies that can do this well are few and far between.

It’s time to stop managing our mobile app install campaigns to a CPI and hold ourselves and our partners accountable to delivering on our actual business needs.

Dennis Mink is the VP, Marketing at Liftoff (www.liftoff.io). Liftoff helps mobile marketers grow an active mobile user base by running true CPA-optimized mobile app marketing and retargeting campaigns. For help with your mobile user acquisition strategy, email info@liftoff.io.

Read more blogs