If you’re a newbie to User Acquisition, this guide will provide you with everything you need to know about User Acquisition’s basic terms and metrics.
Before launching your UA strategy, you might need to run few test campaigns to discover not only the best creatives but the best acquisition channels. Depending on your budget - you might be able to test only 2 - 3 different channels, so make sure you get enough data to validate it - normally 500 - 1,000 users will be enough to make your LTV (Lifetime Value) estimations.
These campaigns are set to reach the top rank in a country's chart on the app storefront and gain lots of organic installs as a result of that rank exposure. While this is a strategy that has been used quite a lot in the past, the truth is that they are expensive (especially if you’re targeting countries like the US or UK). This is because you’ll need a lot of installs (+60k per day if you’re hitting the TOP 10 US games) and these users, normally incentivized, will not generate any revenue or interaction with your game, beyond the install itself.
Click Through Rate (CTR)
The Click Through Rate (or CTR) measures the effectiveness of your ads. It’s the result of dividing the number of clicks on your campaign by the total number of impressions on your ad. To improve a low CTR you should test new creativities or create new segmentations to find the right audience for your game.
Conversion Rate (CR)
This is the number of users that performed the action you set as a goal divided by the total number of users that clicked on your ad. You can set up different goals such as installs, in-app events, registrations, etc. This metric can help you determine if your campaign is effectively showcasing your game’s features. This metric can also help you to identify if there are any other issues in the download process (large download size, the game is not supported in some OS versions, etc.).
Cost Per Install (CPI)
CPI is the result of dividing the total spend in your campaign by the number of installs generated. Traditionally, this is the metric you'll need to compare to the channel's LTV to determine if the UA is profitable. Related to this metric, you can also calculate the eCPI (effective Cost Per Install) which is calculated as the spend in your paid campaign divided by the total number of installs (including organic ones you didn't pay for).
CPI = Spend UA ÷ # Paid Installs
eCPI = Spend UA ÷ # Installs (Paid + Organic)
In-App Optimization Campaigns
As the use of data has become increasingly prevalent, UA channels have evolved to implement AI (Artificial Intelligence) solutions. It's possible to optimize your UA effort not only to obtain cheap installs (the main UA goal in recent times,) but also to reach and acquire high-quality users in the most effective way. Thanks to these new campaigns, achieving the lowest CPI is no longer the goal, instead, obtaining a positive ROAS (Return on Marketing Spend) is the new metric to monitor. Platforms such as Facebook, Google AdWords, or Ad Networks like Taptica or YouAppi allow UA Managers to optimize towards specific in-app events: tutorial complete, level up, purchases or any other event of interest, but you MUST implement and track these events correctly to successfully acquire the users most likely to trigger these events.
Lifetime Value (LTV)
LTV is the average revenue generated by every install over its lifetime. This is a key metric that should drive and guide your UA. After testing and defining this value for each and every channel and cohort of users, you’re ready to set up your UA strategy plan and launch it accordingly. As the person responsible for UA, your duty is to detect and push those channels which bring the most profitable LTV to your game. If you’re interested in knowing more about its calculation and the ways you can improve on the product side take a look at our previous post on this topic.
Return on Ad Spend (ROAS)
As UA evolves and gets more complex as a result of In-App optimization campaigns, cohort analysis, and UA platform features, UA is no longer focused on targeting the lowest CPI, but looking for the best and most effective UA spend. For that, you need to compare your advertising spend against the revenues driven directly from it. This metric allows you to compare different UA strategies and choose those that bring revenues in the most cost-effective way. In order to understand this KPI, let’s use an example:
Imagine your LTV historically has been $0.91 and you decide you want to test an in-app optimized campaign towards the event purchase. After performing an initial test, with the same ad spend, your results are as follows:
Which campaigns would you choose?
A. Cheaper Installs + Higher Volume
B. Higher CPI, Fewer Installs
You'll always choose campaign A, right? 😂😂
Now, let's calculate its ROAS:
ROAS = Revenue generated (# Paid Installs x LTV) ÷ Ad Spend
Campaign A has performed as expected and the ROAS is positive, so far so good, but it's not always so easy, trust us!
On the other hand, Campaign B has a higher CPI but thanks to the purchase optimization, your % of purchases has increased pushing your LTV to $1.49. This campaign not only has a higher LTV but also a higher ROAS, meaning that for each $1 you spend on your ad campaign, you get more revenue than with campaign A.
Now, which would you choose?
If you choose B - that’s cool - but consider that campaign A is also profitable, so why choose? You should be able to balance and set a UA strategy where you’re able to get high-quality users but also some volume - always looking towards profitability!
If you have any other questions or need help with your UA? We are more than happy to help! Just contact us here, and don’t forget to check out the first part of this series on User Acquisition while you’re at it.