Why App Re-Engagement Ads Are The Next Big Thing In Mobile Advertising

beyondAs new apps continue to flood the market, it has become harder for app developers to acquire new users, forcing developers and marketers to think beyond installs to drive more revenue. Apple said on Tuesday that App Store customers spent more than $10 billion in 2013 and that it has paid developers $15 billion to date, up from $9 billion in May last year.

The company did not reveal its App Store revenue for 2012, but it is estimated to have earned roughly $5 billion. Apple also said that its App Store now has more than one million apps. Google Play reached one million apps in July and Amazon’s Appstore is also growing.

With the app market growing more competitive, advertisers must spend more to attract users. The cost of acquiring a loyal user (or someone who opens an app at least three times) through marketing campaigns increased from $1.30 in 2012 to $1.62 in 2013, according to mobile app analytics firm Fiksu.

In addition, app users are holding on to apps for longer periods of time, according to another app analytics company, Flurry. The average app retention period (which Flurry defines as three weeks) has increased about 20% year over year between 2012 and 2013, the company reported.

While marketers may be pleased to know that people are deleting apps at slower rates, most companies have been slow to invest in ads to drive further engagement, added Flurry CEO Simon Khalaf.

“We still see over 90% of the demand focused on app install ads and 10% on app engagement ads,” Khalaf said. However, Khalaf added, travel, leisure and mobile commerce companies have indicated that they will be rolling out more app engagement ads in 2014, which could suggest that this trend is slowly changing.

While still relatively new, the mobile re-engagement market is becoming lucrative. Facebook launched mobile app engagement ads last year and right before it went public, Criteo snapped up the startup Ad-X Tracking, which helps marketers track app installs and conversion rates for retargeting campaigns.

Michael Oiknine, co-founder and CEO of the mobile analytics firm Apsalar, also noted that advertising budgets are starting to shift from a focus on installs to deeper engagement efforts.

“CPIs continue to see inflation, but what we’re really starting to see is other verticals getting deeper into marketing their mobile apps,” Oiknine said. “Two years ago, most of the spend in mobile marketing was by games. Today, other verticals are coming in swinging massive budgets; we’re seeing major growth in terms of advertiser adoption by other verticals like retail, travel and finance.” In terms of retargeting trends, deep-linking or linking to a specific page within a website, is becoming popular, Oiknine added.

Khalaf agreed that the mobile app marketing industry is quickly maturing. “Basically, marketers are focused on three things,” Khalaf said. “Traffic acquisition versus a focus on installs, ROI measurements and the emergence of mobile app re-targeting.”

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