As app store inventories have exploded, the sun has set on a "build it they will come" approach to mobile app development in favor of data-driven mobile app development and marketing. There are fewer opportunities for mobile apps that can attract a large audience of prepaid downloads.
Now that the holiday season has arrived, app developers, just like every brick-and-mortar and ecommerce store, are ramping up for holiday shoppers. Astute app developers are preparing for the spike in mobile device gift giving that drives app downloads. Localytics recently disclosed data-driven insights they have gained in the course of instrumenting mobile apps and collecting usage data that they shared to help mobile developers prepare for the holiday season.
The mobile app developer’s challenge isn’t acquiring sheer volume of downloads, but downloads from users who will become loyal users. User loyalty means repeat engagement with the app and it is measured in terms of cost per loyal user (CPLU), compared to the expected lifetime revenue forecasted from the user, which should drive profit. A data-driven approach that tracks usage gives the app developer insight into the best marketing alternatives and helps determine where to invest development resources to enhance the product and capture new users. The compressed holiday season makes it more challenging.
Daniel Ruby, Localytics' director of marketing, says mobile apps updated just prior to the holiday season produce an increased level of engagement measured by the number of sessions. This effect is especially prominent with Android apps, which experience a 129% increase in engagement. Some of the increase can be explained by the release of holiday versions of popular apps, such as the Angry Birds Holiday Edition, but updates without a holiday theme also inexplicably enjoy a spike in engagement when a pre-holiday update is released.
Engagement is so important because there are fewer opportunities for apps that command a large paid download audience, leading developers to turn to in-app purchase revenue models. In a study of in-app purchases in content, music, game and m-commerce apps, Localytics identified that deep user engagement led to 44% of revenues beginning after the first 10 sessions. Ruby advised that "an app developer should be careful not to propose a transaction too early in the user’s engagement." The measure of engagement increases post-holiday, so higher rates of in-app purchases can be expected in January and February if the holiday experience of 2011 is repeated.
Since so many app development companies spend so heavily with ad networks to acquire users before Christmas, less is spent after the holiday season. The result is lower volumes and prices on the ad auction networks, lowering the CPLU. In 2011, the average CPLU decreased by almost 40% between December and January. App developers with money to spend on advertising auction networks in January will receive a post-holiday bonus.
Many examples of beautifully designed apps from creative developers can be found in the app stores. But to be a financially successful app developer, design goes beyond the app, and must factor the business intelligence data required to establish a multi-disciplinary business around the app.