How to Be Profitable: App Acquisition vs. Retention Costs

Growth is the defining metric for many mobile teams. Whether in the form of scrappy growth hacking or big-budget brand advertising, there’s no denying that acquisition is one of the most sought-after marketing goals.

But without a solid retention strategy, your growth dollars are wasted. In Leanplum’s latest data science report, we dove into the facts around retention.

The report, titled Retention, Revealed: The Need-to-Know Facts Behind App Retention & ROI, takes on the real prickly problem that mobile teams face. Paid acquisition is not cheap, and retention rates on mobile are lacking. App publishers are paying to acquire users only to lose them before they generate any revenue.

Want to make your app profitable? Here’s a hint: retention is the key.

Why Is Retention Important?

In the US, the average cost per install (CPI) ranges per app vertical and platform. The average is around $2, but goes up to $3.34, according to Fiksu. The same report shows that the cost per loyal user is well over $4. When apps spend so much money on acquisition costs, factoring in App Store Optimization (ASO) strategies, advertisements, and much more, allotting budget for retention can sometimes fall by the wayside.

What’s more, you need a ton of downloads to be considered a mainstream success. Analyzing the top 100 apps in the App Store, the top-ranked apps have at least 5MM downloads. That’s almost $17MM spent in acquisition.

However, the majority of users abandon these apps after the first day of use. That’s why it’s increasingly important to protect your acquisition investment and retain users throughout their lifetime. Without a retention strategy, your app is bleeding money.

Opportunities for Better Retention

Let’s start by looking at retention split a few different ways. As you can see in this chart, apps lose the majority of their users after the first app open.

Some highlights:

  • By day one, apps only have a 21 percent retention rate.
  • By day 10, this number reduces to 7.5 percent and stays steady through the first month. By day 90, number drops to 1.7 percent.

This chart shows an interesting opportunity for app managers. The day 10 through 30 retention rates are consistent. By focusing on improving the day 10 numbers, you can positively impact the retention of a user throughout their first month. And since the majority of abandonment has already occurred within the first month, you may be able to increase retention for all your users in the long-term.

To put the average retention rates in perspective, there’s a scene in the TV show, Silicon Valley, where the characters discuss the number of downloads their app has versus the number of daily active users (DAU). In the show, the app has 500,000 downloads, but only 19,000 DAU.

Drawing from the previously mentioned CPI data, this means that the characters spent around $1MM on user acquisition, but only retained about 3.8 percent of users. Judging by these numbers, their retention rate is on the higher side of average, but they lost a significant sum of money — $962,000 — with users who never returned to the app.

How Can Apps Be Profitable?

Apps should focus as much on retaining users as they do on acquiring.

A strong marketing strategy involves spending half as much money on acquiring the right kinds of users. Then, spend the remaining half on retaining those users throughout their lifetime.

But how do you invest in retention? Of the many possible solutions, the best one we found was push notifications. Implementing push into your marketing strategy can increase app retention by 20 percent. What’s more, personalizing push send times based on individual behaviors can increase retention by 7x

Download our data science report to learn how push notifications can increase your retention by 20 percent.