What is ROI?
Return on Investment refers to the gains or earnings produced after a particular advertising campaign. ROI allows you to measure the fruit of your efforts and is just one of many Key Performance Indicators (KPIs), that is often used in the world of Mobile Advertising.
ROI is something which should be at least estimated before setting up an app monetization campaign. It must lie at the heart of the strategy. After all, what’s the point in investing money into a campaign if it’s not going to be profitable?
Important ROI Metrics to take into consideration in the app ecosystem
Your app’s ROI depends on your CPI and LTV. So, these firstly have to be worked out.
CPI
Cost Per Install is a business model used in mobile apps. CPI is when the advertiser pays only when the user clicks on ad and downloads the app as a result.
You must calculate your entire marketing expenses over a specific period and then divide that number by the total number of installs your app received during that time.
CPI- Total spend/No. of new installs which comes from the campaign.
Et voila, you’ve got your number!
Next?
Lifetime Value (LTV)
This metric refers to the value each user brings to your app. Measuring LTV is necessary because only focusing on the number of installs is a huge mistake – ok, it’s important but what truly matters is attracting a high-quality to the app. who is more likely to contribute and spend money. Think about what they bring to the table – retention, monetization and social sharing.
To calculate your LTV, you must take an even wider look at company numbers and find out the average amount of money each user spends after install and the average amount of time they are active and keep completing actions (spending) in your app.
LTV = ARPU x customer lifetime
ARPU (Average Revenue Per User)
ARPU or current LTV is the average revenue per user. It is the amount of revenue each of your active users contribute in the app, whether it be the coins the purchase or the money they spend reaching the next level.
ARPU=Total revenue/number of users
So how do you make your campaign profitable?
For a positive ROI, you want your LTV to exceed your CPI. Put simply, you want the money coming in from each customer to be greater than the money you dish out per customer.
If your ROI is negative, you need to take action to increase it right away. But even if your ROI is positive you can always optimize campaigns to increase revenue.
There are two main ways to boost ROI: lower your CPI or increase your LTV.
Tips on lowering your CPI
- Review your Marketing strategies and methods to acquire customers at a lower cost
- Convert traffic you’re receiving at a higher rate
- Increase app’s ability to be shared organically
Tips to increase LTV
- Enhance the app funnel – think of ways to ensure users pass on to the next stage – optimize campaigns to ensure they carry on. Test out various ways and solutions so you can obtain an understanding of user activity.
- Spend more in-app – convince users to spend more in your app. The way it is monetized has an impact on the end result and improves conversions.
- Increase Social Sharing- implement social sharing features and encourage users to be more active on social networks, connecting with potential users who will become loyal customers.
With these ideas in mind, you’ll be sure to get the best ROI possible. Remember, it’s not necessary to spend a fortune on a marketing strategy to get millions to download your app. You just need to keep on top of your game, optimize frequently and make some adjustments along the way. Working with a company who specialise in campaign optimization and ensure that your ROI is maintained is a way to get started. For more info, contact us.