Mobile

Study: 9K apps and 397M users show cost-per-install is the worst mobile user acquisition method

Thousand of developers are making millions of apps to reach billions of consumers. Unfortunately, that critical last step of mobile app development, user acquisition, is getting harder, not easier.

A full third of developers get cheated when trying to acquire users

Above: A full third of developers get cheated when trying to acquire users

Image Credit: VB Insight

And it gets even more unfortunate, as most developers are doing it wrong.

In a 230-developer study that covers over 9,000 apps and almost 400 million monthly active users, VentureBeat has learned that developers’ least-favorite user-acquisition method is often the most financially successful. In addition, the most-favored is also the least likely to bring in the best high-quality users.

And while Facebook and Google are the undisputed king and queen of user acquisition, five other companies tower above the dozens of other user-acquisition competitors.


Get the full VB Mobile User Acquisition study on VB Insight


The app marketer’s challenge is clear: With 98 percent of revenue coming from freemium apps, finding the right users is critical to whether an app lives or dies. Entice users who pay for premium upgrades or in-app purchases and you’ll live.

Fail and you’ll die.

Making the whole game more complex is untrustworthy user acquisition companies — a full third of developers in our study report getting cheated when working with one of these firms.

According to the app and game makers we surveyed, cost-per-install is the mobile developer’s runaway favorite advertising mode for user acquisition.

The mostly commonly-used user acquisition methods.

Above: The mostly commonly used user-acquisition methods.

Image Credit: VB Insight

In fact, 52 percent of developers choose CPI first, more than double the number of the next-leading method. That’s probably due to its sheer simplicity: If the cost-per-acquisition is lower than your user lifetime value, you pull the trigger. For the same reason, it’s also very safe … you know exactly what your costs are going to be, and if they fit within your app’s economics, nothing can go wrong.

(Theoretically, of course — assuming you’re right about your customer lifetime value.)

The problem is that most of the users you acquire via CPI are astonishingly low-value. Over two-thirds of the users you acquire via CPI have sub-$10 LTV, and almost one in six have profitability-dooming LTV of precisely zero.

70% of developers use social media to acquire users

Above: 70% of developers use social media to acquire users

Image Credit: VB Insight

Three other user-aquisition methodologies, regardless of user acquisition company or partner, generate better users at a lower price, including cost-per-lead (CPL), which generates just as many high-value “whales” who spend more than $75/year in your app despite being used by 10 times less frequently.

While Facebook is by far the biggest contributor to mobile developers’ user acquisition campaigns, Google plus YouTube actually beats Facebook for first place as the most-preferred user acquisition partner.

In the crowded user acquisition marketplace, however, where we counted easily 75 competitors, five companies stood head-and-shoulders above the rest. In fact, NativeX, Fiksu, Chartboost, Flurry, and the recently acquired AdColony all tower above their competition, with cumulative response numbers comparable to YouTube and Twitter.

The complete study is available at VB Insight.

More information:

Facebook is the world’s largest social network, with over 1.15 billion monthly active users. Facebook was founded by Mark Zuckerberg in February 2004, initially as an exclusive network for Harvard students. It was a huge hit: in 2 w... read more »

Google's innovative search technologies connect millions of people around the world with information every day. Founded in 1998 by Stanford Ph.D. students Larry Page and Sergey Brin, Google today is a top web property in all major glob... read more »

The Fiksu Indexes, which measure monthly fluctuations in competition for rank in the app stores, and the cost to acquire loyal users(1), help mobile app marketers benchmark their performance against industry averages.... read more »

Flurry is optimizing the mobile experience for developers, marketers and consumers. Flurry’s market-leading analytics product sees activity from more than 500,000 smartphone and tablet apps on over 1.3 billion devices worldwide, givi... read more »

NativeX is a leader in innovative monetization and user acquisition solutions for mobile and desktop apps. For publishers and developers who want to monetize with advertising that really works, NativeX is the marketing technology platf... read more »

AdColony is a mobile video advertising company whose proprietary Instant-Play™ technology serves razor sharp, full-screen video ads instantly in HD across its network of iOS and Android apps, eliminating the biggest pain points in mo... read more »

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17 comments
Nick Stancato
Nick Stancato

I refuse to even download 'free' games. Let me buy the full game upfront with no microtransactions or I refuse to be a customer

Andres Castañaza
Andres Castañaza

Gabriel y Daniel esto es importante para cuando lancemos ya sea Findbooks.me o parquear.me. leanlo

CM Samala
CM Samala

Michael Vattuone Cayden Mak Josh Levinger

Draven Midnight Stone
Draven Midnight Stone

Most developers don't know what they're doing. They're just pumping out code for pumping out code's sake.

Allen Klosowski
Allen Klosowski

Even if there is a net-zero revenue value for aggressive acquisition, is there value in terms of how that boosts an apps ranking or virality in social groups?  

Oliver Kern
Oliver Kern

The other two third didn't realise until now? Go check your data!

David K
David K

"In the crowded user acquisition marketplace, however, where we counted easily 75 competitors, five companies stood head-and-shoulders above the rest. In fact, NativeX, Fiksu, Chartboost, Flurry, and the recently acquired AdColony all tower above their competition, with cumulative response numbers comparable to YouTube and Twitter."


Up until this paragraph

David Shantz
David Shantz

There is no alternative to owning the entire process of finding customers - this is at least half the business of running an app. In fact, if you can figure out how to find loyal, motivated users, then the app's functionality is somewhat inconsequential... We have been working on cracking the code on customer acquisition for upwards of a decade...  Here is a complete guide on Quora... http://bit.ly/userstoapp  or visit our site, wildoutwest

Jay Deiboldt
Jay Deiboldt

Most smart studios only run ads to their non-payers, so when you advertise with networks like Chartboost, you're automatically starting with a "lower quality" pool of users. Of course you can still convert them, but when you are starting with lower quality, you end with lower LTVs