I recently wrote a short reply to the question “How should I spend a $10k app marketing budget?” in the ‘App Entrepreneurs and Marketers‘ Facebook group. This is a great question with many different possible answers, and i’m going to share my more detailed response with you in this post. $10k is a LOT of money for an indie developer and you are right to be carefully considering how to spend it.

You don’t just want revenue or downloads; at the end of the day the goal is to earn more from the app than you spend on it. a.k.a, profit.f

First of all, let’s consider why you want to spend money marketing your app. My guess is that your primary reason is because you want to make money from the app. You don’t just want revenue or downloads; at the end of the day the goal is to earn more from the app than you spend on it. a.k.a, profit. After all, you wouldn’t build an app for $20k if you thought you could only earn $10k in revenue over it’s lifetime would you?

So if you want to invest in marketing, you will want to make sure that for every dollar you spend generates more than $1 in app revenue revenue for you. That might sound basic, but it’s important for you to approach this with the right mindset. Always keep in mind that the goal is to generate more revenue than you spend. If you come in thinking you can spend $10k on marketing for your first app launch and it will be a hit you are setting yourself up for disappointment.

 

Assumptions

For the purpose of this discussion, I’m going to make a couple of assumptions.

1. I’ll assume that you’re app is ready to be published and you have got a beautiful icon, screenshots and a nice app preview video.

Marketing will only get users to your app page on the relevant app store. You’re icon, screenshots and preview video are a crucial part of getting them to take that final step and click the download button.

These are important because you have to put your app in the best position possible to get downloaded once users see it. Marketing will only get users to your app page on the relevant app store. You’re icon, screenshots and preview video are a crucial part of getting them to take that final step and click the download button. If you’re spending money on ads but users aren’t downloading because your screenshots look horrible, you are wasting money. If any of these aren’t up to scratch or you don’t have a preview video at all, you should fix this before you start spending your marketing budget.

2. I’ll also assume that your app has an analytics platform such as Flurry, Google Analytics, etc. built in.

You should be tracking all important events in the app, and you must be able to measure important metrics like retention, session length, screen flow, average revenue per user (ARPU) and life-time value (LTV), just to name a few. Analytics are important because without them it is impossible to measure your results. I will go deeper into this topic later in the post. For now you should understand that without analytics it’s impossible to know whether or not your marketing efforts will be profitable. If you haven’t built analytics into your app, you should do this before you start spending money on marketing.

 

So Where Do You Start?

When you first launch the app, you will get some downloads immediately just due to the way the app stores work. The volume will depend on a number of factors such as how well you’ve done your app store optimization and how much pre-launch marketing you did.

There are 2 goals you want to achieve this early on; to start collecting data via your analytics platform, and to start getting some positive reviews.

There are 2 goals you want to achieve this early on; to start collecting data via your analytics platform, and to start getting some positive reviews. I recommend spending as little of your marketing budget as possible at this stage. It’s difficult to put a number on it, because obviously more users mean more reliable data from your analytics and more reviews. Aim for at least 2000 downloads before you start to pick through the analytics data. If you don’t look like getting that many downloads in the first few weeks, you can spend a few hundred dollars on Facebook Ads to get you across the line. This will also give you some experience with Facebook Ads and help you understand how they work. Just remember to set a low budget to avoid wasting money. You just want a minimum number of users so you can analyze the data for now.

Why are reviews important?

Reviews matter because they are a form of social proof that encourage other users to download the app. Users are much more likely to download and install an app with a 5 star rating than one with no reviews. Remember that your marketing efforts will only get potential users to your app’s page in the app store. Having a 4 or 5 star rating improves your chances of them clicking that download button, and that means it increases the effectiveness of your marketing spend.

Give it at least a few weeks and get as many downloads and reviews as you can in that time while spending as little of your budget as possible.

 

Review the analytics data

Stay with me here, I know it’s not the most exciting topic in the world but we need to look at some numbers before we start splashing our $10k around.

Once your app has been live for a few weeks, you can start to look at some key metrics that will help you determine if a paid marketing campaign is a good investment decision. It will also help you determine which forms of marketing are viable for your app. Here are the first 2 that I would look at;

  1. Average Revenue Per User (ARPU) – ARPU can be defined as the average revenue generated per user of your app over a given period of time. It can be calculated by dividing revenue over a given period by the number of active users of your app over that same period. For example, if you generated $10000 from an app over 12 months, and you had 5000 users during that 12 month period then your ARPU would be $2.
  1. Life-time Value (LTV) – LTV can be defined in different ways depending on the developer, but a simple definition is the amount of money a single user generates over the time that they are actively using your app. For example, if a user spends $10 in the 3 months that they use your app their LTV is $10.

Why these 2 metrics? Because they will help you understand how much money a user is worth to you in terms of app revenue. By knowing how much revenue you can expect per new user you are in a much better position to spend you’re marketing budget wisely.

According to Fiksu’s cost per install (CPI) index, which measures the cost per app install directly attributed to advertising, the average CPI for iOS in November 2014 was $1.10, and $1.13 for Android.

Mobile App Average Cost Per Install

 

That means that if you have an iOS app, it will likely have cost you $1.10 on average in November 2014 to acquire new installs through advertising. What does that mean for you if you want to be sure you will get an ROI on your marketing spend? It means you need to be sure that on average, each user that downloads your app will generate more than your CPI in revenue.

 

Next Steps

Now it’s time to look at your own data and make a decision based on the numbers as to how you should spend your marketing dollars. Obviously you will want the most cost-effective solution, and unfortunately there is no single answer I can give you for this. What I can tell you is you will need to continue to experiment and tweak your marketing efforts to find what works for you and your app. Your goal is to increase your ARPU and LTV, while minimising CPI.

Personally I would recommend you set up some Facebook Ads to get you started. It’s relatively simple to get set up and allows split testing without much effort. Split testing allows you to run 2 different ads at the same time so you can see which one is more effective. In addition to this, you can set a budget as high or as low as you want to prevent unexpected advertising expenses. Start with a small budget, say $20 per day, find out how you can minimise your CPI by experimenting with different settings, ad images, ad text etc. Data for your Facebook Ad campaigns is easy to understand and it gives you the CPI, which is another plus.

From here on in it really is about perfecting those ad campaigns to minimize your CPI, and finding ways to increase LTV within your app. Once you are at a point where you are comfortable that you are seeing positive returns on your marketing investment you can ramp up the spending and use that $10k budget.

As I said there are many approaches to this and this is just how I would do it. The key point to take away is that you should not just blindly throw your marketing budget away hoping that you get lots of downloads. First you need to understand the data and be able to calculate a ROI on your marketing spending. Learn how users behave within your app and improve on it. Test marketing channels and techniques and look at metrics like CPI and how those new users are affecting your revenue.

If you can get to a point where you can spend $1 of your marketing budget and get back $1.5, you know you’ve done it right.

It’s not easy but you will get there if you stick with it. If you can get to a point where you can spend $1 of your marketing budget and get back $1.5, you know you’ve done it right.