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Five common mistakes made in marketing freemium apps
Eric Benjamin SeufertIsrael Mobile Summit
June 10, 2014
Who am I?
Who am I?
Freemium Economics
Who am I?
Freemium Economics
Head of Marketing at Wooga
Who am I?
Freemium Economics
Head of Marketing at Wooga
Mobile Dev Memo
StructureHow is Freemium different?How are
Mobile Games different?Mistake 1:Misunderstanding LTV
Mistake 2:Misunderstanding featuring
Mistake 3:Misunderstanding ad networks
Mistake 4:Misunderstanding CPI
Mistake 5:Misunderstanding chart dynamics
How is Freemium different?
How is Freemium different?
What is freemium?
How is Freemium different?
What is freemium?• 0 marginal cost of distribution
How is Freemium different?
What is freemium?• 0 marginal cost of distribution• Low inherent conversion rate
How is Freemium different?
What is freemium?• 0 marginal cost of distribution• Low inherent conversion rate• Large scale / large total addressable market
How is Freemium different?
What is freemium?• 0 marginal cost of distribution• Low inherent conversion rate• Large scale / large total addressable market• Continuous monetization curve
How is Freemium different?
What is freemium?• 0 marginal cost of distribution• Low inherent conversion rate• Large scale / large total addressable market• Continuous monetization curve• Minority of highly engaged users
How is Freemium different?
How do freemium mobile products differ from paid mobile products?
How is Freemium different?
• No switching cost
How do freemium mobile products differ from paid mobile products?
How is Freemium different?
• No switching cost• LTV difficult to calculate
How do freemium mobile products differ from paid mobile products?
How is Freemium different?
• No switching cost• LTV difficult to calculate• Much larger potential audience (everyone can afford free)
How do freemium mobile products differ from paid mobile products?
How is Freemium different?
• No switching cost• LTV difficult to calculate• Much larger potential audience (everyone can afford free)• Network effects easier to achieve
How do freemium mobile products differ from paid mobile products?
How is Freemium different?
• No switching cost• LTV difficult to calculate• Much larger potential audience (everyone can afford free)• Network effects easier to achieve• Advertising not as abrasive
How do freemium mobile products differ from paid mobile products?
How is Freemium different?
• No switching cost• LTV difficult to calculate• Much larger potential audience (everyone can afford free)• Network effects easier to achieve• Advertising not as abrasive• Multiple points of monetization
How do freemium mobile products differ from paid mobile products?
How are Games different?
How do mobile games differ from non-game consumer mobile products?
How are Games different?
How do mobile games differ from non-game consumer mobile products? • Not action-driven / different use case
How are Games different?
How do mobile games differ from non-game consumer mobile products? • Not action-driven / different use case• Demographic bifurcation
How are Games different?
How do mobile games differ from non-game consumer mobile products? • Not action-driven / different use case• Demographic bifurcation• “Content” is different than “feature set”
How are Games different?
How do mobile games differ from non-game consumer mobile products? • Not action-driven / different use case• Demographic bifurcation• “Content” is different than “feature set”• Longer development lead-times before launch
How are Games different?
How do mobile games differ from non-game consumer mobile products? • Not action-driven / different use case• Demographic bifurcation• “Content” is different than “feature set”• Longer development lead-times before launch• No “network moats” / more susceptible to cloning
How are Games different?
How do mobile games differ from non-game consumer mobile products? • Not action-driven / different use case• Demographic bifurcation• “Content” is different than “feature set”• Longer development lead-times before launch• No “network moats” / more susceptible to cloning• Well-defined, perennial “archetypes”
How are Games different?
How do mobile games differ from non-game consumer mobile products? • Not action-driven / different use case• Demographic bifurcation• “Content” is different than “feature set”• Longer development lead-times before launch• No “network moats” / more susceptible to cloning• Well-defined, perennial “archetypes”• Long history for comparison
StructureHow is Freemium different?How are
Mobile Games different?Mistake 1:Misunderstanding LTV
Mistake 2:Misunderstanding featuring
Mistake 3:Misunderstanding ad networks
Mistake 4:Misunderstanding CPI
Mistake 5:Misunderstanding chart dynamics
Misunderstanding LTV
What is Lifetime Customer Value (LTV)?
Misunderstanding LTV
What is Lifetime Customer Value (LTV)?• Present value of future cash flows from user
Misunderstanding LTV
What is Lifetime Customer Value (LTV)?• Present value of future cash flows from user• What individual user can be expected to pay
Misunderstanding LTV
What is Lifetime Customer Value (LTV)?• Present value of future cash flows from user• What individual user can be expected to pay• Can be aggregated over various dimensions (demographic
characteristics / early user behavior)
Misunderstanding LTV
What is Lifetime Customer Value (LTV)?• Present value of future cash flows from user• What individual user can be expected to pay• Can be aggregated over various dimensions (demographic
characteristics / early user behavior)• Marketing metric
Misunderstanding LTV
What is Lifetime Customer Value NOT?
Misunderstanding LTV
What is Lifetime Customer Value NOT?Linear*.
*usually. An LTV evolution curve could theoretically be linear.
Misunderstanding LTV
What is Lifetime Customer Value NOT?Linear*.
*usually. An LTV evolution curve could theoretically be linear.
Misunderstanding LTV
What is Lifetime Customer Value NOT?Linear*.
*usually. An LTV evolution curve could theoretically be linear.
Misunderstanding LTV
What is Lifetime Customer Value NOT?Immediate.
Misunderstanding LTV
What is Lifetime Customer Value NOT?Immediate.
180-day LTV =
Misunderstanding LTV
What is Lifetime Customer Value NOT?Immediate.
180-day LTV =
Pay $CPI
Day 0
Misunderstanding LTV
What is Lifetime Customer Value NOT?Immediate.
180-day LTV =
Pay $CPI
Day 0 Day 180
Recoup $LTV
Misunderstanding LTV
What is Lifetime Customer Value NOT?Immediate.
180-day LTV =
Pay $CPI
Day 0 Day 180
Recoup $LTV
(More on this topic: http://bit.ly/2MLTV)
Misunderstanding LTV
What is Lifetime Customer Value NOT?Upper limit that can be spent on per-user acquisition.
Misunderstanding LTV
What is Lifetime Customer Value NOT?Upper limit that can be spent on per-user acquisition.
Marketing Profit = LTV - CPI
Misunderstanding LTV
What is Lifetime Customer Value NOT?Upper limit that can be spent on per-user acquisition.
Marketing Profit = LTV – CPI
Operating Profit = LTV – CPI – Everything Else
StructureHow is Freemium different?How are
Mobile Games different?Mistake 1:Misunderstanding LTV
Mistake 2:Misunderstanding featuring
Mistake 3:Misunderstanding ad networks
Mistake 4:Misunderstanding CPI
Mistake 5:Misunderstanding chart dynamics
Misunderstanding Featuring
What is Platform Featuring?
Misunderstanding Featuring
What is Platform Featuring?• Free publicity given by a platform to a specific app
Misunderstanding Featuring
What is Platform Featuring?• Free publicity given by a platform to a specific app• A source of free installs for said apps
Misunderstanding Featuring
What is Platform Featuring NOT?Charity.
Misunderstanding Featuring
What is Platform Featuring NOT?A winning lottery ticket.
Misunderstanding Featuring
What is Platform Featuring NOT?Guaranteed.
Misunderstanding Featuring
What is Platform Featuring NOT?Guaranteed.
StructureHow is Freemium different?How are
Mobile Games different?Mistake 1:Misunderstanding LTV
Mistake 2:Misunderstanding featuring
Mistake 3:Misunderstanding ad networks
Mistake 4:Misunderstanding CPI
Mistake 5:Misunderstanding chart dynamics
Misunderstanding Ad Networks
What is a Mobile Ad Network?
Misunderstanding Ad Networks
What is a Mobile Ad Network?• An intermediary between publishers and advertisers
Misunderstanding Ad Networks
What is a Mobile Ad Network?• An intermediary between publishers and advertisers• A technology platform that facilitates the sale of ad
impressions
Misunderstanding Ad Networks
What is a Mobile Ad Network NOT?
Misunderstanding Ad Networks
What is a Mobile Ad Network NOT?Frictionless / cost free.
Misunderstanding Ad Networks
What is a Mobile Ad Network NOT?A source of infinite inventory.
Misunderstanding Ad Networks
What is a Mobile Ad Network NOT?A source of infinite inventory.
Misunderstanding Ad Networks
What is a Mobile Ad Network NOT?A source of infinite inventory.
Installs Purchased
Misunderstanding Ad Networks
What is a Mobile Ad Network NOT?A source of infinite inventory.
CPI
Installs Purchased
Misunderstanding Ad Networks
What is a Mobile Ad Network NOT?Accessing inventory that no other network is accessing (necessarily).
StructureHow is Freemium different?How are
Mobile Games different?Mistake 1:Misunderstanding LTV
Mistake 2:Misunderstanding featuring
Mistake 3:Misunderstanding ad networks
Mistake 4:Misunderstanding CPI
Mistake 5:Misunderstanding chart dynamics
Misunderstanding CPI
What is Cost Per Install?• The average price paid for a mobile app install
Misunderstanding CPI
What is Cost Per Install NOT?A price that is set by an ad network.
Misunderstanding CPI
CPI = / CTR / IRCPM1000
Misunderstanding CPI
CPI =
Market-based
/ CTR / IRCPM1000
Misunderstanding CPI
CPI =
Product / Creative dependent
CPM1000
/ CTR / IR
Market-based
Misunderstanding CPI
What is Cost Per Install NOT?Constant over time.
Misunderstanding CPI
What is Cost Per Install NOT?An indicator of “quality” / how much user will spend.
StructureHow is Freemium different?How are
Mobile Games different?Mistake 1:Misunderstanding LTV
Mistake 2:Misunderstanding featuring
Mistake 3:Misunderstanding ad networks
Mistake 4:Misunderstanding CPI
Mistake 5:Misunderstanding chart dynamics
What are Chart Dynamics?
Misunderstanding Chart Dynamics
What are Chart Dynamics?• The interplay between chart position (top downloaded / top
grossing) and app visibility
Misunderstanding Chart Dynamics
What are Chart Dynamics?• The interplay between chart position (top downloaded / top
grossing) and app visibility• The ability for an app developer to offset per-user marketing
losses with additional “organic” installs
Misunderstanding Chart Dynamics
What are Chart Dynamics NOT?The same for every app.
Misunderstanding Chart Dynamics
What are Chart Dynamics NOT?A substitute for a quality product.
Misunderstanding Chart Dynamics
What are Chart Dynamics NOT?A substitute for a quality product.
In a chart push…
Misunderstanding Chart Dynamics
What are Chart Dynamics NOT?A substitute for a quality product.
In a chart push…
Profit = Marketing Cost – ( LTVacquired * UsersAcquired + LTVorganic * UsersChart )
Misunderstanding Chart Dynamics
Misunderstanding Chart Dynamics
What are Chart Dynamics NOT?A substitute for a quality product.
In a chart push…
Profit = Marketing Cost – ( LTVacquired * UsersAcquired + LTVorganic * UsersChart )
If LTVs are low, may be impossible to get enough users from chart position to offset marketing cost.
What are Chart Dynamics NOT?Sustainable at a constant CPI.
Misunderstanding Chart Dynamics
Freemium Economics
Mobile Dev Memo
http://FreemiumEconomics.com
http://MobileDevMemo.com
Questions?