To meet heightened demand and ensure visibility among a sea of competitors, apps are upping their investment in marketing, both in user acquisition and re-engagement. In fact, according to Appflyer forecasts, app install ad spend alone will eclipse $50 billion in 2019 — a 30% jump compared to 2018.
1) Non-Organic Installs: Apps are increasingly reliant on marketing to drive growth
In the last 5 years, we’ve seen the share of marketing-driven installs (AKA non-organic installs or NOI), take up a growing piece of the app install pie — largely the result of broken organic app discovery and the increased confidence in data-driven insights to inform smarter media buying.
According to Appflyer data, the smaller the app, the greater effect of this phenomenon. After all, small apps are unknown, meaning the likelihood of organic discovery in the app stores is almost non-existent. This leaves them with no other choice but to invest in marketing.
A gaming vs. non-gaming analysis shows similar trends, with the exception of large gaming apps. These games increased their share of NOI by 25% in 2019, a 3x increase compared to large non-gaming apps. Supporting this finding, we’ve found that making it to the top 10% of gaming apps this year (by number of NOIs) required a 20% increase, or almost 800,000 installs. Because there are so many gaming apps, the top 10% club is a large one, and so is the top 5% group with a 1.8 million NOI threshold in 2019.
2) Retargeting: Share of conversions up 35% in Non-Gaming, down 30% in Gaming
With a steady presence in the mobile ecosystem for years, it was only in 2018 that we started seeing the widespread adoption of retargeting in the app space.
The rise of retargeting can be attributed to the following factors:
- Considerable churn, with average Day 30 retention rates ranging between 5%-10%.
- Increasingly robust measurement and attribution on the app level with more comprehensive campaign performance data informing LTV-driven budget allocation.
- The adjustment of bidding technology to the in-app environment.
- The much less expensive cost of retargeting (in comparison to UA) along with the ability of marketers to generate an impressive increase in the average revenue per paying user (see chart below).
In 2019, app retargeting gained even more momentum.
The average share of retargeting conversions among apps running retargeting campaigns eclipsed the 50% mark of total marketing conversions (retargeting conversions plus non-organic installs).
By the end of the year, over 30% of apps will be running retargeting campaigns, a 16% increase year over year.
In 2020, Appflyer predicts that the savvy and creative Gaming developers will lead the push forward in retargeting. We expect a host of new tools and methods to arise taking retargeting optimization to the next level. Given the nature of this industry, the rest will follow.
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| Source: AppFlyer |
Monetization strategies are complicated. While in-app purchases (IAP) was the largest and most common revenue stream, app developers were hesitant about blending advertising in their apps. They were concerned that ads would harm the user experience and decrease IAP conversion rate.
Indeed, optimizing towards more payers and purchases, while spotting and nurturing big spenders has proven to be profitable. However, IAP revenue is only relevant for 5%-10% of the user base, not to mention the fact that turning a profit on the average user is often a long-term endeavour that could take months and even a year.
And so, evolution in the industry brought in-app advertising to the forefront in 2019 as a legitimate method to monetize the non-paying users. This was massively and successfully executed by Hyper Casual games in the last 1.5 years, spreading across the mobile gaming ecosystem, and gradually blending within non-gaming verticals as well.
While many app developers are able to maintain a solid business on in-app purchases alone, it is more than possible, and even recommended, to blend advertising while ensuring no harm is done to the app’s flow and user experience.
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| Source: AppFlyer |
Mobile app install fraud continued to be a significant polluter of data in 2019. While fraud is transitioning toward automated and programmatic, bot-based fraud, a newer form of mobile fraud emerged — in-app and purchase fraud.
This fast-growing method of attack demonstrates the sophistication of bad actors in the mobile ecosystem. The complexity and diversity of post-install events are fertile ground on which fraudsters thrive, manipulating developers in ways that are increasingly harder to detect.
5) Programmatic: The app install market grew 30% more than the non-programmatic market
Programmatic media buying has been around for over a decade, and has been playing an integral role in web advertising — desktop and mobile web. Overall, programmatic is projected to attract $70 billion of ad spend in the US alone in 2020.
In 2019, the growing interest in IAA turned in-app bidding into a hot topic, indicating heightened demand to develop programmatic solutions to better manage the demand-supply trade in the in-app environment. Indeed, Mobile Demand Side Platforms and mobile ad networks needed to quickly adjust themselves and pursue sophisticated solutions to overcome obstacles such as in-app scale, difference in real time bidding protocols between web and app, and more.
When it comes to the role programmatic is playing in app install campaigns specifically, Appflyer have found that the number of attributed installs of leading mobile DSPs grew by nearly 60% — 30% higher than the non-programmatic market. That said, programmatic still holds only a very small percentage of the total app install market.
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