June 22, 2023
What is user acquisition? This fundamental question opens up a world of strategies, KPIs, and more that the average marketer has to understand if they’re going to succeed. The field has changed enormously since its beginnings, but mobile app user acquisition remains vital to how an app, product, or service drives growth and maintains healthy margins.
In this article, we’ll define user acquisition, explain its continued relevance, describe how we reached the state of today’s app user acquisition landscape, and explore strategies you can use to grow your mobile app’s audience.
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User acquisition (or UA) is the process of bringing in new users for an app, platform, or service, through paid and organic marketing channels. It's most commonly associated with performance-based paid marketing channels such as social and search ads. UA's ultimate goal is to bring in new users for less money than they generate in revenue, turning each into an opportunity for profit. Key UA channels include Facebook, TikTok, Snapchat, Google, and Bing. Mobile user acquisition managers also often work with a wide variety of in-app advertising networks, exchanges and platforms like Unity Ads, ironSource or Applovin.
While our user acquisition definition is simple, driving cost-effective UA campaigns requires well-informed strategies powered by experience and critical analysis of the digital advertising world – particularly in an app economy that’s more competitive than ever. Google Play hosts 2.6 million apps1, per AppBrain, and PocketGamer reports the Apple App Store hosts another 4.8 million2. Even great apps can struggle to find footing, and organic installs – those that are attributed to a marketing effort outside of paid campaigns – are more precious than ever.
Furthermore, finding an initial audience isn’t enough; Appsflyer found 96% of users will stop using an app they’ve downloaded within 30 days of installation3. A successful UA strategy also helps bring in high-quality users who stick around and generate revenue over time. This feeds into an increasingly important metric: customer lifetime value (LTV). Marketers can spend less on UA if each new user sticks around longer and generates proportionally more revenue. That’s why Mistplay encourages users not just to discover and play new apps, but to continue using them in order to earn rewards. As a result, Mistplay funnels high-quality, high-LTV users to its partnered apps. Click here to learn more.
When the App Store and Google Play’s predecessor, the Android Market, launched in 20084, app publishers largely used click-through rate (CTR) as their main success metric, according to YouAppi5. CTR could be determined by counting the number of users that clicked on an ad and comparing that figure to the total number of users who saw it. This made sense for the time: Getting users in the door was the first hurdle apps needed to clear when the marketplace itself was so young. Over time, however, publishers noticed that CTR did not always directly correlate with revenue. If a user that clicked through didn’t convert by installing the app, watching an ad, making a purchase, or performing some other revenue-generating action, they didn’t contribute to the bottom line.
Within a few years, marketers had learned to integrate other metrics to support CTR, which remains valuable as a measure of basic interest. The cost of 1,000 impressions, or cost-per-mille (CPM), added a lens for campaign cost-effectiveness, as did cost-per-install (CPI). Over time, however, advertisers shifted focus to the revenue generated by their user acquisition efforts. Metrics derived from customer lifetime value (LTV) gained prominence, including return on ad spend (ROAS). ROAS tracks the efficiency of net-revenue generation for each paid ad campaign. To this day, it may be the most important performance metric for its ability to clarify the bottom line.
But by this point, the calculus had fundamentally changed. As 9to5Mac reported, there were 90 billion app installs in 2016 across the Apple Store and Google Play6. The audience was there, but they were swimming in an ocean of apps fighting for their attention. It wasn’t enough to get your ad in front of people – you had to get it in front of the right people, earn their attention, and outcompete the other apps trying to do the same.
Programmatic advertising uses algorithms to place digital ads across vast digital landscapes automatically, and according to budgets and priorities advertisers choose in advance. It's powered by real-time bidding (RTB) technology, which lets advertisers bid on ad inventory as it becomes available. For properties that use programmatic advertising, any time a user opens a web page or an in-app ad is called, the ad inventory is bid upon in a real-time auction, bought, and displayed in the time it took the page to load. According to Raincross founder Kevin Watts, when RTB rose to prominence in the mid- to late 2000s, it allowed advertisers to target specific audiences based on demographics, browsing behavior, and other criteria, and shifted digital advertising from bulk inventory purchases to buying individual impressions7.
Early programmatic advertising faced fraud and information issues, as intermediary ad networks could limit visibility into the ad inventory itself and inflate its value. That led to programmatic direct, in which advertisers buy inventory from publishers without a middleman. Advertisers gained greater control over how their ads are placed, reduced costs, and increased transparency. But challenges remain. Publishers can still opt not to share user data with advertisers, which makes targeting slightly more difficult.
Some of that difficulty can be offset by the contemporary use of AI and machine learning in programmatic advertising. These programs take in vast quantities of data and optimize ad campaigns based on their analyses. Advertisers can use AI for bidding, targeting, and the optimization of ad creative. Channels for programmatic advertising have also expanded in recent years, as connected TV (CTV) and over-the-top (OTT) video have adopted the approach to compete against linear TV for advertiser budgets.
Amid growing scrutiny on user privacy, Apple decided to effectively kill the IDFA8 (identifier for advertisers) in iOS devices in 2021. Before then, advertisers could use the IDFA to track each anonymized user, making it easy to build customer profiles and follow the user’s journey from seeing an ad to converting. Now, users must opt into being tracked by each app they install. Apple’s renewed focus on privacy also prompted Google to begin tweaking its Google Advertising ID (GAID)9, allowing users to opt out completely. (Google now has more changes coming down the pike.)
The change hurt big advertisers such as Facebook’s Audience Network, which lost $12 billion per PocketGamer, but it was life-threatening for many smaller mobile businesses. In fact, 40% of mobile companies reported a loss after the change, as finding a large enough vein of the right audience for niche products became much more difficult10. Publishers now need to use contextual signals – info about where and when an ad is shown – rather than historical data from the users themselves to determine where high-value users congregate. This is contextual advertising: matching the content of a webpage with the content of an ad. For example, AllTrails might advertise its hiking app beside an article about the benefits of hiking boots because both the article and the ad appeal to the same audience.
Contextual advertising works because it doesn't rely on third-party cookies or other tracking methods. It respects user privacy while retaining effective placements. But it has its limits. Even hikers on a hiking blog may not click an ad for a hiking app if they don't connect with the ad itself. Creative aims to fill this gap by ensuring that when the right customers see the ads, they connect with them and click through. As ad creative is one of the few levers advertisers can still affect after the end of IDFA, it has gained paramount importance. That’s why Chartboost says user acquisition experts must now invest in top-shelf creative11. Ads need to tell a compelling story with a visual style tailored to their audience and convey a clear value proposition if they hope to win over customers.
As challenges mount for user acquisition managers, it has become more important than ever to align all stages of their growth funnel around loyalty, which brings us into the age of loyalty-centric growth in which we now find ourselves.
Market saturation is at an all-time high and user acquisition costs are growing faster than ever before. At the same time, SensorTower data from 2022 saw almost every genre experience dramatic revenue decline, with Newzoo optimistically calling it a “corrective year.” These and other factors have combined to drive up the value of well-retained, highly engaged users. As ChurnZero CEO You Mong Tsang explains in the Harvard Business Review, “The rule of thumb is that acquiring a new customer costs five times as much as retaining a current one. That's never more true than during economic downturns.”12
But the best digital marketers are looking beyond first-time user experience and critically examining the complete user lifecycle in the context of loyalty. As industry analyst Eric Seufert13 explains, “Many people consider a ‘leaky bucket’ to refer specifically to the onboarding funnel, but in reality user churn is more expensive later-stage than during the onboarding process … Losing the user with a year of tenure is more damaging to the business than losing the early-stage user because of that proven affinity and acquired behavioral data.”
The current age of loyalty-centric user acquisition is shaping up to be characterized by ad creative that aligns with first-time user experience, intrinsic reward systems, and long-term engagement strategies. Now more than ever, publishers need to begin with the entire user lifecycle in mind in order to keep portfolios profitable. Loyalty can be difficult to quantify, but measurements such as rolling retention, repeat purchase rate, and stickiness14 are helping marketers gain a better picture of their audience's loyalty.
Here’s a question countless app publishers have asked themselves: What is user acquisition good for if the average user generates so little revenue? With Mistplay, there’s no call to wonder. Mistplay users receive personalized recommendations of games they’re sure to like and real-world rewards for using them. Users find apps they love, and publishers get a constant funnel of high-quality user acquisition. Get in touch today to learn more.
Need to brush up on your user acquisition fundamentals? Check out our comprehensive article, “Mobile user acquisition: The modern developer’s guide”