You can be on Entrepreneur’s cover!

Are Mobile Ads Good for Your Business? (Infographic) Mixpanel studied 400,000 users of apps, comparing the engagement of those prompted by advertisements with that of people who selected applications on their own. The results may surprise you.

By Suhail Doshi

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

It's no secret that ads are crucial for user acquisition and brand awareness; they're a tried and true strategy for pulling in new cohorts, driving traffic and increasing conversions. When companies are playing the long game, though, do ads bring in the most valuable users for their businesses?

Clicks and app installs are only as interesting and actionable as the stories behind them. It's meaningful to know whether a person installed an app after seeing a paid, targeted advertising campaign or if he or she tried it without first viewing any ad.In the second case, the individual can be said to have arrived at the application organically, meaning he or she heard some information on the radio or from a friend or simply searched in an app store by topic. My company, Mixpanel, decided to investigate advertisement efficacy and shed a little light on whether app users prompted by ads are more or less engaged than those who organically select them.

In March, I along with other Mixpanel researchers analyzed anonymous data about the app usage of 400,000 individuals, who all had downloaded social, messaging and gaming apps on mobile devices. We looked at the patterns of addiction and retention by those users who had come to try the apps after viewing mobile ads and pitted their behavior against the people who had arrived organically. (Addiction is defined as a measurement of how many unique days a user spends on an app within a designated time frame and can also be measured on an hours-per-day basis. The more unique days that a person spends with an app, the more addicted he or she is considered.)

What we found was a clear and intuitive narrative that speaks to the role of mobile advertising in the life cycle of a user. When it came to addiction, there was a very slim difference between organic and ad-driven users. In the two weeks following app installation, both organic and ad-driven users showed the most activity on just a single day, with few being engaged for two or more days. Organic users proved to be only minutely more addicted than their ad-acquired counterparts, but the margin was incredibly thin. For apps where the revenue model is pay-to-play, drawing in one-day users isn't a terrible thing. On the flip side, apps that offer a freemium model can't rely on these customers coming back to drive more business.

The classic measurement of how sticky an app is is, of course, retention. To see how organic users and ad-acquired users behaved over the long run, we compared their retention over an eight-week period. Organic users beat out ad-acquired users by a sizeable margin. About 17 percent of organic users were retained for eight weeks, compared to just 10 percent of ad-acquired customers.

For most app companies, building a base of customers who are addicted and will stick around is obviously ideal; the best kind of growth is sustained over time, with the assumption that the longer consumers stick around, the more valuable they will become. What our data shows is that the platonic ideal of a customer base -- that of highly addicted, highly retained, active and loyal group of consumers -- is more likely to be built from organic users, not those drawn in by ads. See our research outlined in the following infographic:

Are Mobile Ads Good for Your Business

Suhail Doshi is the co-founder and CEO of Mixpanel, a web and mobile analytics platform. 

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick

Side Hustle

He Took His Side Hustle Full-Time After Being Laid Off From Meta in 2023 — Now He Earns About $200,000 a Year: 'Sweet, Sweet Irony'

When Scott Goodfriend moved from Los Angeles to New York City, he became "obsessed" with the city's culinary offerings — and saw a business opportunity.

Travel

Save on Business Travel with Matt's Flight's Premium, Only $80 for Life

This premium plan features customized flight deal alerts and one-on-one planning with Matt himself.

Science & Technology

Here's One Reason Urban Transportation Won't Look the Same in a Decade

Micro-EVs may very well be the future of city driving. Here's why, and how investors can get ahead of it.

Health & Wellness

Do You Want to Live to Be 100? This Researcher Has the Answer to Why Longevity is Not a Quick Fix or Trendy Diet

Ozempic, cold plunges, sobriety and the latest health fads are not what science reveals will help you live a longer and healthier life.

Data & Recovery

Better Communicate Data with Your Team for $20 with Microsoft Visio

Visio features a wide range of diagramming tools that can support projects across all industries.