A new report published by marketing analytics platform AppsFlyer and Facebook analyzes $2.4 billion in revenue generated by 3,800 apps worldwide during early 2018 to get a better picture of the lifetime value (LTV) for mobile apps around the world. LTV measures the overall revenue a business generates from an average user throughout their time using an app, and it lets marketers know how much they can spend on user acquisition while remaining profitable. Using this benchmark as a foundation, the two companies are helping app marketers optimize their strategies across different regions and verticals.
The study found that app marketing revenue is up 80 percent from 2016 despite growing challenges such as an increasingly competitive marketplace coupled with falling retention rates. AppsFlyer goes on to state that there are currently two parallel trends that are adding to the monetization challenges, the first being that organic app discovery is “largely broken,” leading to a decreased number of high-value organic users. This is occurring as media costs are on the rise, which combines to have a negative impact on profitability.
In order to overcome these challenges, the report recommends that apps maximize the potential for multiple revenue streams, including in-app purchases (IAP), in-app advertising (IAA), paid-for apps and subscriptions. However, it tempers that statement by explaining that the premium “paid-for” model only works for a small percentage of apps with unique content from a top brand, while subscriptions benefit a minority of apps that constantly provide ongoing value through regularly updated content to a loyal group of users. Therefore, IAP and IAA make up the vast majority of revenue from apps with the former making up the lion’s share. But more developers are seeking to “monetize their in-app ad real estate” and take advantage of the rising media costs.
However, not all verticals are equal in the app market. Although the report states that there are major performance gaps between the gaming, shopping and travel verticals, gaming has less of a divide between both iOS and Android performance and between organic and non-organic traffic compared to the other categories. With gaming, average revenues from iOS users were only 28 percent higher than on Android, but they spent 70 and 60 percent more in shopping and travel respectively. Additionally, organic users only bring in six percent more revenue in gaming, while travel is 25 percent higher and shopping is estimated to be no less than 170 percent more. AppsFlyer cites the significantly heavier use of data among gaming app marketers as the key reason for this tremendous gap.
According to the study, the average gamer spends about $1.70 during a 90-day period, and the number jumps to $70.27 when isolating paying users only, even though only about 3.8 percent of gamers make purchases. Additionally, the UK and US markets generate significantly higher revenues than other countries, with growth continuing well past the 30-day mark. Developing markets such as Brazil, India and Indonesia show much less revenue and growth, while the spending trend in China lies in between mature and developing markets.
But despite these differences, the report recommends that game marketers focus on quality to attract paying users no matter what region they’re in. It’s also important to re-engage users after about a week, when revenue starts to drop off. The report further suggests entering into developing regions for new revenue streams to compensate for the extremely competitive US and UK markets, naming China as a major opportunity.
As for the shopping category, the study found that consumers usually know about brands before installing their apps, which is why the category has a high percentage of paying users. About 9.7 percent of users spend money on shopping apps, averaging $13.88 per user across a 90-day period, combining both organic and inorganic traffic. When it comes to shopping, organic users spend almost triple the amount non-organic ones do.
Again, the UK and US are the leading markets in the shopping category with Russia coming in third. However, only about five to six percent of users make purchases within the first week, no matter which region they’re in, with the number of conversions increasing by about 70 percent between day seven and 30, and about half of paying users in all countries tend to be repeat customers.
Although iOS shoppers bring in about 70 percent more revenue than Android users, the study states that the latter’s scale is too large to ignore. Marketers can maximize this platform by targeting high-end Android device users.
About 9.6 percent of travel app users spend money, averaging $29.42 per user across a 180-day period, with iOS users spending 50 percent more than Android users. The report adds that travels apps see a 60 percent higher LTV from iOS users, and organic users are 2.5x more likely to book than non-organic ones, bringing in 60 percent more revenue.
Unsurprisingly, the US and UK are the lead markets in this category with Indonesia being a distant third followed closely by Russia. The report also states that Russia, Brazil and India have little long-term value for travel apps while the UK is kind-of in its own league. UK travelers are 3x more likely to book a trip within the first day compared to other key markets, and its users are far more likely to book more than three times within 90 days.
When it comes to travel apps, the report suggests re-engaging users after seven days, relying more on data to improve the value of market-driven installs, and focusing mainly on developed markets—particularly the UK—even though Indonesia is showing encouraging signs of growth.