When I first started thinking about running a paid user acquisition campaign for one of my apps, I naturally wanted to know how much each of my existing users were worth (ARPU). I wanted to know how much I was making from each user so I could decide if the ROI from my Facebook ads was worth it.

So I looked at how many users I had and divided that number by my total revenue. The result was a very, very small number! I’m talking a couple of cents. I thought I’d never be able to buy new users for less than that amount, but I tried it anyway.

As I got better at creating and managing Facebook ad campaigns, I learned how to acquire higher quality users for less money. When I say higher quality, I mean people who spend more money.

It didn’t take long before I noticed that my revenue seemed to increase disproportionately when I was buying users from Facebook. I suspected that the users I was buying from Facebook were spending more money than my organic installs but at the time I had no data to back it up.

That led me to start using app attribution solutions to measure the LTV & ARPU of users based on how they were acquired. This opened up a whole new world of analytics.  And it opened my eyes to just how wrong it was for me to lump all of my users together to calculate their value.

I wanted to demonstrate this in a case study to show you how much different the value of users acquired through Facebook App Install Ads can be compared to organic installs. The results will surprise you. The users acquired through Facebook spent WAY more money on IAP’s. Keep reading to see all of the data and find out just how much more they spent.

I’ve also included a bonus for you at the end of this article to help you save money on your next Facebook ad campaign, so make sure you don’t miss it!

 

About the test

  • I wanted to make sure I had a clean slate to start with, so I launched a new app specifically for this case study. It’s a slot machine app with 12 different IAP’s available.
  • The Facebook ad campaign ran from April 26 to May 4, 2015. Only users acquired between those dates are included in the data. The same applies for organic installs.
  • Facebook app installs were purchased from Australia, USA, Canada and UK only. To give an accurate comparison, only organic installs from those countries are included.
  • IAP’s included are those made between April 26 and May 18. The app also includes ads but no advertising revenue is included here because it’s not possible to attribute ad revenue to a particular user acquisition source.
  • I use Localytics for attribution and I find it to be a great tool. Unlike other analytics tools I’ve used, it can actually differentiate between jailbroken and non-jailbroken devices. This lets me weed out almost all of the fake IAP’s that get registered. If you’ve ever used custom events with Flurry, GA or Facebook App Analytics you might have noticed IAP events get registered but never show up in iTunes Connect. This is because people are using jailbroken devices to get IAP’s for free.

 

Surprising Results Show Huge Value From Facebook App Install Ads!

The difference between users acquired organically compared to those acquired through the Facebook ads is amazing. Let’s take a look at the results!

We will start by looking at the total number of installs and IAP revenue generated.

App Installs

Total number of users acquired through Facebook ad campaign: 468.

Total number of users acquired through organic installs: 433.

app annie total downloads

The total number of installs over the selected period. Note this includes both organic and Facebook installs. (Source: App Annie)

 

IAP Revenue

Users acquired through FB app install ads generated $88.88 in revenue through 12 separate purchases.

Users acquired organically generated $18.93 from 7 separate purchases.

attribution - in app purchases for facebook app install ads vs organic

This chart shows all successful IAP’s separate by acquisition source. Note, this includes jailbroken devices so not all IAP’s shown here were legitimate. These were later filtered out. (Source: Localytics)

 

Each user acquired through Facebook App Install Ads:

  • Generated an average of ~$0.19 IAP revenue
  • Completed 0.025 IAP’s
  • Each successful IAP had an average value of $7.40

Each user acquired organically:

  • Generated an average of ~$0.045 in revenue
  • Completed 0.016 IAP’s
  • Each successful IAP had an average value of $2.70

 

What Can We Learn

Here is what we can see immediately from these results:

  • First of all, the users acquired through Facebook spent, on average, 4x more than those acquired organically.
  • Second, we can see that the Facebook acquired users made IAP’s more frequently. With each user making 0.025 IAP’s compared to 0.016 for organic users.
  • Third, the average spend per IAP for Facebook acquired users is much higher. On average, they spent almost 3x more per IAP than the organic users.

If I calculated the average amount spent on IAP’s per user across all users it would be just $0.12. As you can see that’s still a long way short of what users acquired through Facebook spent. Using that figure to make decisions about my Facebook app install campaigns would be very misleading.

That wasn’t all I learned from the data. In fact, there are some really valuable pieces of information that I can use to increase IAP spending:

  • Most IAP’s were made within 2 days of the user first opening the app. The image below shows the percentage of users who completed an IAP x days after first using it. This tells me that I could try things like targeting the segment who haven’t purchased after 2 days of first opening the app with pop-ups offering special deals on IAP’s. Or I could even set my ads to only be displayed to users who haven’t made an IAP after 2 days.

in app purchase analytics showing iaps from facebook app install ads

Here you can see the percentage of users who completed an IAP x days after they first used the app. The majority of IAP’s were completed within 2 days of the first launch. (Source: Localytics)

 

  • Facebook users spent the most money on $5 and $20 IAP’s (~$75 of the $88.8). That tells me I should try focusing on promoting and selling these above the other IAP’s, particularly if I plan on continuing to buy installs through Facebook.

 

Conclusion

The big lesson here is that it’s dangerous to assume that users acquired through highly targeted Facebook ad campaigns have the same value as organic users. As you can see by the 4x difference in average spend, this isn’t always the case. If you’ve been holding out on running Facebook ads because you are concerned that the ROI won’t be there it might be time to think again.

Also, if you are serious about running paid user acquisition campaigns you really do need to use an attribution solution. Without it you can’t see how much revenue you are generating directly from the installs you buy.

Does this make you rethink using Facebook app install ads for your app? Or have you already tried them and had a similar experience? Tell me about it in the comments!

Bonus

Hopefully this has inspired you to start running Facebook App Install Ads for you mobile apps! If it has, make sure you don’t waste money on costly mistakes. I’ve created a free 4-part email training series to help you get started with FB ads. Just click here to get started.