iOS cost per install to exceed $7 over holidays

Superdata warns of "user acquisition bloodbath," suggests skipping the seasonal marketing push

The cost of acquiring new users for mobile games is growing faster than the market itself, according to research firm Superdata. The company this week told developers on its blog to brace themselves for a "mobile user acquisition bloodbath" this holiday season, as the already increasing cost of new users escalates sharply during the year-end festivities.

For 2013, Superdata projects the US mobile game market to increase 25 percent to $3 billion. However, while average revenue per users have been more or less flat since the beginning of the year, the cost per install (CPI) in October was 41 percent than in January, and Superdata projects that December's CPI on iOS will be more than double what it cost in January, somewhere in the $7 to $8 range. The company also did some quick math to illustrate how difficult it is to turn a profit when users cost that much to pick up.

"Let's say that you've just acquired a cohort of 100 brand new users at an average CPI of $2.25 USD. The average conversion rate (from a non-spending to a spending user) in October was 4.68 percent," the company said. "Each of these players spends $21.45 (average revenue per paying user for mobile in the US). That gives you $100.39 in monthly earnings. With $225 in cost, you'll need to make sure you keep those users engaged for at least two months before you start making a profit. And two months is an eon in mobile game time."

Given the exorbitant cost of new user acquisition this holiday season, Superdata even raised the possibility that mobile outfits might want to spend the season on the sidelines rather than burn money trying to reach the top of the charts for Christmas morning when a flood of new smartphone and tablet owners start looking for games to download.

"One school of thought is to ignore the holiday season all together, rather than spending several months of marketing budget at the end of the year," Superdata said. "The idea of outspending others to get picked up by millions of proud new handset owners is, according to some, a fantasy. Better to spend your money after the holidays."

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Latest comments (8)

Paul Johnson Managing Director / Lead code monkey, Rubicon Development8 years ago
This is insane, I've never gotten how this market works at all.

If you pay $7 per install, that means you make at least $8 from every single download? I thought the average conversion was about 5%, so the AVERAGE paying player stumps up $160 ? Every single paying player? I'm crying bullshit.

I will be avoiding this entire thing forever, don't worry about that. Our average download is only worth a few of cents and we're stil making a living. It's amazing how you can get new players for free when your game is good...

Edited 1 times. Last edit by Paul Johnson on 26th November 2013 9:38pm

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Jakub Mikyska CEO, Grip Digital8 years ago
I remember times when we got paid for every person who played games. Then we started to give games away for free and now we have to pay for each person who plays. This model is seriously broken and the only one who is going to consistently make money on that are the middlemen.
There's at least one new "mobile marketing company" contacting us every week, promising user acquisition, or user ratings and user reviews on AppStores. Or mobile gaming web magazines sending us price sheets for reviews and other coverage. And we even haven't released a mobile game in almost two years!

I actually pity all those investors pumping money into mobile gaming start-ups who burn through the funding with this bloothbath. They are one of the key sources of the mobile growth IMHO. I expect the bubble to burst sooner or later.
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Paul Johnson Managing Director / Lead code monkey, Rubicon Development8 years ago
Agree with all of that. I do wonder if anyone ever steps back and just thinks what they're actually getting from all these "opportunities".
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Philipp Nassau Student - Business Administration (M. Sc.) 8 years ago
At this point one might wonder whether making a bunch of potentially good but budget friendly games would be more efficient than marketing one of them this immensely, then relying on word of mouth. Free hedging included.

As a side note, how many of the "proud new owners" are there really? Many are just upgrading their devices at this point and especially for a lot of casual games it's important to run on older phones and tablets so they're essentially seeing a much smaller increase in potential customers than one would initially expect. This isn't the console market where there's a new set of games for every new generation of hardware.
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Neow Shau Jin Studying Bachelor in Computer Science, Universiti Sains Malaysia8 years ago

yeah, Bruce should weigh in on that, but he seems to be more interested in the other article about the Next gen consoles for some reason.
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Bruce Everiss Marketing Consultant 8 years ago
Performance marketing is silly.
Just a big spread sheet of balancing off cost of acquisition against revenue.
It is almost embarrassing that mobile marketing has come to this and is symptomatic of a dearth of marketing creativity. The mobile market has expanded so fast that many of the people doing the marketing aren't good enough.
Hopefully this is a temporary situation and either the existing marketing people will learn or better ones will be hired.
We have exciting stories to tell and should relate them to our customers in far more engaging ways.
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Alfonso Sexto Lead Tester, Ubisoft Germany8 years ago

Considering all the pain we are having in F2P browser based companies to keep getting a profit and all the mobile studio companies I see collapsing almost every month, I'll say the bubble did already burst.

Let's face it: The mobile device gamer (if he still exist at all) is like the PC gamer of the late 90's: He/she has no problem expending 400 each year to replace a perfectly working phone, but he will Jailbreak it asap since he/she does not want to pay 90cent for and app, although he/she will use it a lot.

I see it everyday. It is sad.
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Brian Lewis Operations Manager, PlayNext8 years ago
The rise in CPA in mobile is the result of the high demand for gamers during the Holiday Season. This is primarily caused by a lack of discoverability for new games in the market, and a change in mobile development from small indies, to larger studios that want to capitolize on 'seasonal' demand. I agree that there is going to be a shakeup, and that it will cause many companies to fail. However, this is also going to create the incentive for long term changes in the industry that will be healthy for everyone. Doesnt anyone remember when this same basic issue occured with Facebook games? Was it really that long ago?
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