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App cross promotion

April 15, 2013

Does Cross-Promotion Work?
byMark WilcoxinBusiness

The concept of app developers banding together and promoting one another’s apps in order to increase awareness and download numbers for all concerned makes a lot of sense. Beyond developers promoting their own apps, or a couple of friendly developers getting together and agreeing a deal between themselves, it can get difficult to decide what’s fair with the wide variation in active user bases and engagement across apps. This suggests there’s a clear place for independent brokers to step in and create a market, which a large number have done. Some solutions offer direct trade in promotions between apps but most are simply app-specific advertising networks, charging developers to advertise and paying them for displaying ads. They key difference with pure ad networks is that ads are tracked right through to subsequent install (and sometimes app open) before any payment is made, rather than just a click on the ad.

When viewed as just another form of advertising, with a cost-per-action model, in theory this should work out fairly well for developers. User acquisition costs are predictable for advertisers and those displaying ads have reasonably good targeting built-in before any extra targeting logic used by the cross-promotion network – everyone viewing the ad has a smartphone and downloads apps on it! How does the theory work out in practice?

[sectors ids=’45’]

More users, more revenue

On average developers using cross-promotion networks (CPNs) have larger user bases and make more revenue than those not using such networks. Restricting our analysis to those developers interested in making money, able to report their revenue to us and earning less than $50k per app per month (the handful earning more than this will be discussed later): the average number of active users for the most popular app of those using CPNs was 181,800 vs. 76,600 for those not using CPNs. For the same groups, the average revenues were $3457 vs. $2487 per app per month respectively. As with most things related to the apps market, averages can be deceiving – 56% of developers using CPNs earn less than $500 per app per month. So while cross-promotion clearly works, the better question is who does it work for?

Higher CPI, more users & revenue

We asked developers using CPNs what their typical cost-per-install (CPI) was, without differentiating between usage of the networks as an advertiser, publisher of ads or both. Given this lack of differentiation it’s interesting to note that there’s a strong correlation between CPI and revenues, as shown in the graph below.

It’s also interesting to note that when you include the very highest earners, only $0 install costs and those above $1 are affected. Presumably very successful developers can and do effectively use some of these third party tools to cross-promote their own apps. Whilst it’s extremely likely that only those developers earning high ARPU (and thus almost certain higher than average revenues too) can afford to buy users at >$1.00 per install, it’s not at all obvious that those earning a higher CPI would be earning more revenue in total. Indeed with pure ad networks the reverse is almost true – high earners often have very low eCPM. This suggests two possible explanations, either there is a “high value” end of the market for cross-promotion where successful apps both advertise and publish ads, or only advertisers are making good money and the CPNs are taking a large cut.

High value customers, high value promotions?

Within our survey data there’s a clue that such a high value sub-market exists within cross-promotion networks. We asked developers about their reasons for selecting the networks they use; of all the reasons given, only two were correlated with significantly above average earnings for the sector. Both “Revenue share”, a publisher concern, and “Targeting options”, an advertiser feature, were correlated with more than 2.5 times the sector average revenue. A lot of the very low revenue apps using cross-promotion appear to be primarily targeting a low-income demographic (teenagers) who are unable to buy paid apps or in-app purchases directly and are therefore willing to earn them by either watching ads, downloading other apps or performing actions within them. It’s logical that these apps don’t generate a lot of revenue for publishers or advertisers. On the other hand, apps targeting more affluent users who do pay real cash for their app usage will be attractive cross-promotion partners for developers of other similar apps.

This really just comes down to basic business sense – if you want to make a decent amount of money, build things for people that have it to spend. It’s possible to make up for very low ARPUs with volume but it will require lots of apps and lots more work. Whichever route you decide to take it appears that cross-promotion is a viable monetisation option. If you’re aiming at low-ARPU users it may be that cross-promotion networks are your only advertising option but you’ll also need to find other marketing channels to get enough scale.

[doritos_report location=’DE13 Article – Does Cross-Promotion Work?’]

Advertising RevenueCross-promotionRevenue

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