How Can App Makers Improve Revenue and Keep Users Engaged?
The CEO of AppNext provides clues to the future of apps.
With millions of choices available across the various mobile app stores, discovery is a massive challenge for both consumers and developers. As of this past summer, Android's Google Play Store had 2.2 million apps to choose from, while Apple's App Store, the second-largest app store in terms of product diversity, had 2 million choices. That's quite an array.
Just seven years prior, back in the summer of 2009, the Google Play Store listed some 70,000 apps, while the Apple App Store had 65,000. So, we’re looking at inventory growth on both platforms of around 3,100 percent. But, consumer struggles when looking for apps don’t end with a massive amount of choice. There’s also plenty of unreliable information and questionably authentic user reviews.
Retention rates aren’t great either -- to the point of calling it a "mobile engagement crisis." The average app abandonment rate is nearly 25 percent after one use. This is where Appnext can be of help. The company tripled its year-over-year revenue in 2016. Much of this growth came as a result of its self-serve technology, which connects app providers with ad partners, effectively boosting monetization and discovery for app publishers. It's clearly working. Today its network of participating apps encompasses some 650 million unique audience members.
I spoke with Appnext CEO Elad Natanson to learn more about his take on the mobile app economy.
Do you believe you can sustain that kind of growth?
Natanson: Last year was the third year in a row that Appnext achieved triple-digit growth. Looking into the future, we are aiming even higher. The ecosystem is changing, and we are on the verge of the next mobile revolution. The smartphone era as we know it has barely changed since 2007, when the first iPhone was introduced. Apps have become better, but the overall mobile experience hasn’t. We'll see a big change in this regard in the next one to two years.
Up until recently, app growth was considered one of the major challenges for successful app businesses. Today, app usage has become the new “growth hacking” goal, with vast majority of apps opened only once after being installed. Users are tired; they are overwhelmed. App developers, platforms and operating systems will have to adjust to this reality. App streaming, introduced by Google in 2015, hints at the direction the industry is likely to be taking.
In-app monetization is notoriously tricky stuff for many app developers. What’s the best way to monetizing an app?
In general, I believe that every product change or feature release should be geared towards engagement. The same holds true when you are aiming for monetization.
If you have an in-app purchase (IAP) strategy, your goal is to build a habit rather than push an incremental sale. This ongoing engagement is just as important -- maybe even more so -- for the ad-based monetization used by 80 percent of developers.
App abandonment is rife in this industry. How do you find the sweet spot between ad revenue and user engagement?
I agree app abandonment and fast fading user interest are definitely among the top challenges for app developers. However, app abandonment is not exclusively correlated to ad-based monetization. There are tons of apps that don’t monetize at all, focusing instead on growth, but they’re still facing high churn ratios.
As users, we want to have a great experience, enjoy great content and be entertained. Interestingly, only 3 percent of users are willing to pay for the mobile content they consume, although I believe we’ll see this trend changing in the coming years. In this regard, apps must follow basic business logic -- making sure their average revenue per user (ARPU) exceeds effective acquisition cost (in the case of apps, effective cost per install or eCPI).
Developers should not be bombarding users with ads, intruding on the user experience. They should definitely be paying much more attention to ad relevance.
In the past few years, many developers embraced ad formats entwined with the app or game experience, blending naturally into the UI and product context; formats like native ads, video and rewarded video in particular. I think this trend is still rising, and we will see more and more native experience formats, optimized dynamically to reflect changing user interests. For example, audio ads can be an interesting fit for the so-called background apps we use for music, podcasts and the like.
The bigger wave, though, I believe, will unite technology and usage, triggering mass adoption of app-as-a-platform phenomena. WeChat is a great example of this: Millions of users leverage WeChat for a variety of daily actions, like ordering a taxi, food delivery, paying bills, shopping and much more. Their recent introduction of “mini-programs” sheds light on what mobile will look a few years from now, both in terms of experience and monetization.
What’s next for the app discovery market?
As I mentioned above, the coming trends will be much wider, not limited to app discovery as we think of it today. The major trends lay in hacking app usage, and here new models will emerge, with re-engagement definitely being a major focus and outpacing new user acquisition.
Over the next few years, we’ll see our phones becoming even more personalized, with real-life context becoming the new king on mobile.