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Mobile Marketing

App Developer Conversations: Does the August drop in CPIs spell trouble for the market?

Robi Ganguly  //  October 6, 2012  //  5 min read

In this week’s App Developer Conversations we discussed reports that CPIs dropped a lot in August. Was this just because of the release of the iPhone 5, signs of a longer-term trend or a seasonal dip?

We had a couple key observations:

  • The notion that this had to do with the iPhone 5 release is pretty silly
  • In general, more large brands are entering the app space and as a result, we think CPIs should continue to increase.

Watch to find out more and be sure to see the other two segments from this week:

App Developer Conversations is a weekly video series with Ian Sefferman of MobileDevHQ and Ryan Morel of PlacePlay covering current topics of interest for app developers. If you have suggestions for future conversations, please let us know!

The Transcript:
Robi: Hello. Welcome to next installment of App Developer Conversations. I
am Robi Ganguly, from Apptentive. I am here with Ian Senfferman, of
MobileDataHQ, and Ryan Morel, of PlacePlay. I am gonna talk a little
bit about app marketing costs, specifically, a report coming out in
TechCrunch, coming from FixYou basically saying that app marketing
costs dropped on average $0.20 to $0.25 per installment, in August.
The hypothesis was that it was because people were waiting for the new
device. First and foremost, do you believe that? Do you think that is
why app marketing costs dropped?

Ian: There are so many variables. Who knows? My guess is that it was much
more nuanced and there is a lot of things going on in there. I would
love to see how much they drop last year’s August, and what percent
was that compared to this year’s percentage drop. My gut says no, my
gut says it is BS.

Ryan: Yes, I would say the same thing. I would say a lot of things are the
dumbest things I have ever heard, I would say that about this one,
too. Robi, you know, traffic in August just on an all digital media
content is just down. I think the other thing that is important to
note here is that these are all market-based pricing. App marketing
price went down because most people were either downloading them or
spending for it, so probably it was a spend driver, and that just
means that they knew something, and it was that most people just are
not doing stuff in August.

Robi: At Yahoo!, we saw that every August, prices went down, [inaudible:
01:41] went down. People were not spending as much time on the
internet and ads were not as effective. Marketers figured it out
pretty quickly and they adjust. Some of the tools that people have are
so sophisticated that they adjust for them. I do not think the entire
world was waiting for iPhone 5, even thought that makes for a great
story.

We do not necessarily believe that is why, but here is the next
question, because we have talked about this several times; how will we
know when some piece of data or several pieces of data, in terms of
price activity, have actually pointing to the market hitting its peak,
from a pricing perspective? What do you think? What would you look
for? Would it be like 3 months in a row of price declines? What would
be the canary in the coalmine?

Ryan: I think it would probably be 3 to 6, probably even 6 months of price
decline, varied over, including product launch, and validated by
sources that did not have a lot of skin in the game. Maybe ComScore is
not a great example of who that person will be, but someone like that.
It is hard to say, like, ‘It is August.’ Everyone knows traffic is
down in August, so that is a crappy example. ‘Prices went up in
October.’ iPhone 5 just launched so of course they did, it is
December, and prices always go up. It is hard to get that time period,
but I would say 3 to 6 months, sounds good to me.

Robi: What else would you look for?

Ian: I think that is a tough one. To me, it is going to have to be some
amount of quantitative data, as well as subjective anecdotes from the
largest of the advertisers. If it were TV, I would say, ‘Tell me what
Ford is thinking. Tell me what Coco-Cola is thinking.’ Out in the app
world, I do not know; tell me what Zynga is thinking. I think you
absolutely, 110% have to have that 3 to 6 months data. Without it, it
is total bullshit, I do not care about anecdotes, but I would also
love to hear the anecdotes from the people who are driving the bulk of
this thing.

Robi: I think one of the things that makes me think prices are probably are
going to continue going up as a long term trend for a while is just
that we continue to see more big publishers coming out online. More
big brands coming online with apps or a suite of apps, and as a
result, they got the budget capital to spend, and that is going to
continue to move prices up. We still, I do not think we are seeing any
decrease in the activity from the platforms you have, as we discussed
in a prior installment, an incentive to buy up inventory and just pay
for installs, because the bigger the [inaudible: 04:30], the more they
make money. That, combined with the fact that more big brands are
coming to mobile seems to be favorable, from a pricing perspective.
The flip-side is actually not favorable if you are an independent
developer and you want to be in this game buying people.

Ryan: One of the questions that I would have was whether or not the prices
come down if and when the ‘platform guys’ who are not trying to buy a
user for a game, they are trying to buy user for all of their games
realize that . . . and I am not suggesting that this is true, but I
hypothesize that it might be, that it is impossible to buy a platform
user, on iOS or Android, simply because the switching costs are zero.
That is clearly one of the things that is driving price up. How long,
how much data do they need before they say, ‘Buying users for $3 does
not ensure that they will stay with us throughout our entire product
lifecycle.’

Robi: I think one of the, on that point, one of the arguments the FixYou is
making is what it takes to buy a loyal user, but that seems, again, to
be . . . I know that is FixYou, their stance in the market is, ‘Here
is how you get loyal users and that sort of thing.’ It seems like we
are still really early. I have yet to see anybody do engagement well
to look at the numbers and say, ‘I have been in this business long
enough to know that this person is gonna be around, or more
importantly that I have done over and over again business with people.
I have brought them in for 6 and 12 months.’ I think it is a good
angle on things, but we are still pretty early about engagement and
attention.

Ryan: I wonder also, as you mentioned, as more big publishers come in the
quality of content gets better, so therefore, it gets harder to retain
users, so you end up with only the people who really love it. Do you
think it further celebrates how much people have to spend to require
users?

Robi: Yes. My biased is it changes where they spend money. You could spend
lots of money advertising, and if it is a leaky sieve, it is a leaky
sieve. Why are you going to spend more money on making your app
awesome for the people who are already fans and are using it on a
regular basis, and spend less time trying to acquire, brand new folks
to walk in the door? I think there is this aspect of retention that
really is a shift in fundamental focus to your core audience, your
base. It is what we see.
Thank you. Join us for the next installment of App Developer
Conversations.

About Robi Ganguly

Robi Ganguly is the Co-founder and CEO at Apptentive. He is passionate about giving customers a voice via mobile. Follow Robi on Twitter @rganguly.
View all posts by Robi Ganguly >

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