Indie game developers are inherently creative people when crafting their games, pouring themselves into apps people play and support. Unfortunately, these folks who are often geniuses on the coding side, can struggle when they try to step into a user acquisition and marketing role for their company. Creating games is enough of a challenge, but bringing it to market is a whole different beast. Here I’ll provide a brief overview of the importance of understanding your unit economics when looking to see if scale can be achieved through paid marketing.
Understanding the underlying unit economics of your game are immensely important when crafting your user acquisition (UA) and marketing campaigns. It’s through analysis of your metrics that you build your budget and plan, and figure out whether your game can become huge using paid UA channels like Facebook and Google. The days of securing a feature placement on the App Store or Google Play and relying on the platforms being a free marketing channel are done. In this mature marketplace, effective paid strategies are essential to success at scale.
So, let’s dive into these metrics. These figures can typically be found via the backend of the App Store or Google Play, as well as from your chosen analytics/attribution provider.
Cost per Install, Cost per Action
We’ll start with one of the simplest metrics to track: cost per install (CPI) or increasingly often, cost per action (CPA). These figures represent how much you need to pay to ad networks to get a user to download your app (CPI) or to get a user to download your app then have them perform a specific action in your app, such as finish the tutorial or make an in-app purchase (CPA). The main ad networks have useful estimation tools online to help you calculate these acquisition costs.
Generally speaking this is how the CPI / CPA value is calculated:
Live Time Value
Additionally, you must be ever cognizant of the ingredients of your LTV calculation. The most important ingredients of your LTV calculation are your average revenue per daily active user (ARPDAU), and also your Retention. For freemium games, it’s necessary to look at the behaviour of users at a cohort level rather than individual users, and study the trends in overall behaviour.
Retention is the percentage of users you are able to keep after a certain period of time. Typically, even the most successful apps see a massive drop off in users within a few days days of downloading. As users fall out of your game, you have a smaller subset of users from which to monetize, requiring you to update the game with new or compelling content to bring back lapsed players or acquire new ones. This is why retention is so important - typically if you can fix retention issues and keep people playing, you can find a way to monetize them.
Interpreting your LTV
If your LTV is higher than your CPI, then you have figured out a way to acquire users in an ROI positive way. For example, let’s suppose a user can be acquired for $1.00 and the expected LTV of that user is $1.50 after 90 days, then this is really just an investment formula that shows you a 50% return in 90 days on your ad spend. The problem is of course that many developers are not able to acquire users profitably, in which case it is back to the drawing board to improve the product until it has the retention and monetization parameters that can make paid advertising effective.
The above metrics are the ones most immediately in your control as an indie game developer. Areas where you have less control are the organic users. Maybe your app has a great social/sharing dynamic, or gets some great PR placements, or even gets featured on the App Store or Google Play. These organic (free to acquire) users, while often a small percentage of users, can make up a valuable audience break-down, and are important to focus on. Typically, every dollar invested in paid acquisition will bring in an additional level of organic user (Virality, or “K factor”) which can amplify the paid UA spend.
With complete knowledge of these metrics, you can find other metrics that may be better suited to your apps, such as shifting away from CPI to a CPA that is targeting specific actions like finding players who make a first-time purchase. These tend to cost more than just CPI, but highlight more explicit earnings.
By understanding unit economics, and constantly rechecking the assumptions, you’ll be better equipped to create and market a game app with scale and growth in mind. They will also guide you in defining the parameters within your game that can be updated with a goal in mind, such as new content to improve retention, or in-app sales that increase cohort spending. Take the information available to you and leverage it to help you reach your mobile app or game’s full potential.