Following the momentous iPhone 5 launch, which prompted a period of cost-efficient marketing and heightened organic searches, we observed a dramatic U-turn in November as holiday season spending accelerated and mobile app marketing costs jumped.

For November, the Fiksu Cost per Loyal User Index increased 30 percent, or 32 cents, to $1.38, compared to October’s $1.06. This marked a sharp change in our Index’s trajectory, which steadily declined during the preceding four months, hitting a low for the year during October when the iPhone 5 launch drove increased organic searches and more cost-efficient marketing spends. November’s spike brought marketing costs remarkably close to last year’s level in November 2011, mirroring the impact of the iPhone 4S launch followed by the holiday rush.

Fiksu's November App Store Competitive Index decreased to 4.57 million daily downloads in November, down 15.4 percent from October’s 5.4 million, which had been a seven-month high, driven by enthusiastic new iPhone 5 owners.

Unlike last year, when incentivized networks were still a larger part of the mobile app marketing mix, marketers faced the reality of needing to pay more to get more during the competitive 2012 pre-holiday season. This year, updated App Store rules didn't allow app developers to have offer walls in their apps that incentivized users to install them in exchange for free in-app purchases. Therefore, that consumer acquisition source was impacted. Though incentivized networks still exist, inventory has decreased, so costs have increased as app developers pay a premium for available inventory.

Also, many app marketers target the holiday season to launch or update their apps – and to offset a decline in organic searches in November, marketers had to increase their spending to get their new apps in front of highly engaged, loyal users. Additionally, confusion surrounding Apple’s App Store freeze may have prompted some marketers to spend more money earlier instead of relying on the freeze. This would have been a good decision in most cases, as the freeze turned out to be less than 24 hours this year.

If the 2011 holiday season foreshadows what’s to come, we can expect marketing costs to continue climbing through December as advertisers spend heavily to drive up app store rankings in preparation for the rush of user activity and app discovery at Christmas time. In fact, early reports from Flurry indicate that app downloads reached 328 million on Christmas Day alone – a record high for single day, reports TechCrunch.

A big thank you to all of the publications that covered our November Indexes, including  AllThingsD, MediaPost, TechCrunch and VentureBeat. 

Writes Thomas Hazlett for the Wall Street Journal: "On June 29, 2007, thousands of fan-boys and-girls camped in long lines to inhale a wisp of sweet techno fairy dust. The new iPhone rocked the world. Revolutionary in design, function and ecosystem, it set off the mobile data tsunami. In three days, Apple sold a million of them."

Since that day, the world has never been the same. As we celebrate the iPhone's five year anniversary today, we're reminded of just how much the device has rocked the world and shaped so many aspects of modern culture. In fact, The Atlantic recently pegged the iPhone as the "defining consumer item of its age."

Apple's iPhone undoubtedly sparked the mobile app revolution and burgeoning ecosystem, which has inspired entrepreneurs and developers around the globe, added an estimated 500,000 jobs in the U.S. alone and delighted consumers with more than 650,000 apps in the Apple App Store. But all of those mobile apps are vying for the spotlight – making mobile marketers' jobs increasingly difficult as each month goes by.

Mobile app success – and monetization - requires more than smart and broad mobile media buying. It takes app store smarts, and no one understands and analyzes the dynamics of the app stores quite like Fiksu. For more than one year, our Fiksu Indexes have tracked monthly fluctuations in competition for rank in the Apple App Store, and the cost to acquire loyal users (defined as someone who opens an app three or more times), to help mobile app marketers benchmark their performance against industry averages. In fact, we just released data for the month of May – check out the news release.

To illustrate the ebbs and flows in app store dynamics and mobile app marketing costs over the course of 12 months, we've created the following infographic. It highlights many of the major industry trends that have rocked the world of mobile app marketing along the way, including Apple's ban on incentive-based installs, the iPhone 4S launch, the flurry of activity around the 2011 holiday season and the move away from robotic install tactics.

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Following January's sky-high download volumes available at rock-bottom prices, February presented a steadier and more normalized landscape for mobile app marketers.

Here’s a quick snapshot of the February Index data:

• App Store Competitive Index tracks the aggregate volume of downloads per day achieved by the top 200 ranked free iPhone apps in the U.S. In February, the Index decreased by six percent to 6.35 million daily downloads, down from January's record high of 6.79 million.
• Cost per Loyal User Index measures the cost of acquiring a loyal user for brands who proactively market their apps. For the purposes of the Index, loyal users are defined as people who open an app three times or more. In February, the cost per loyal user rose by 15 percent to $1.31, up from  January’s $1.14.

February revealed a decline in download activity; a contrast to January’s post-holiday download frenzy. Interestingly, even though Fiksu was not working with robotic install traffic sources, our Indexes may reflect early signs of the impact of Apple's emphatic stance against robotic install tactics, following the company's February 6 announcement to crack down on this particular marketing technique.

But while consumers took it easy, downloading fewer apps in February, mobile advertisers returned to action.

Having halting their marketing spend at the beginning of the year to focus on app upgrades and internal level-setting, many mobile marketers geared up for new campaigns in February, driving total marketing costs back up slightly. Yet, the Indexes show that February still presented a great opportunity for mobile app marketers, as volume was plentiful and costs remained at a reasonable level.

Thanks to Dean Takahashi of VentureBeat, Brian LaRue of Adotas, Kathleen DeVere of Inside Mobile Apps, and Keith Andrew of PocketGamer.biz for their reports on our latest Index data.

"The mobile app ecosystem is growing so quickly – exponentially, even – that sometimes it’s hard to see the larger trends occurring in the space,” wrote Sarah Perez of TechCrunch this week. In today’s Fiksu Feed, we’ll explore several app store developments, analyzed over a period of time to help unlock larger industry trends.

TechCrunch’s Perez examined app category growth from May through December 2011 on both iOS and Android to glean new insights around major ecosystem trends. Interestingly, the data reveals that games decreased in popularity on Android during this period, while entertainment apps – like Netflix, Talking Tom, Crackle and Flixster – are on the rise. In the Apple App Store, music and fitness apps are increasing in popularity while utility apps have declined. For further details, check out the full story here.

USA Today’s Roger Yu reported on an interesting new study from Pew Research Center that reveals that consumers’ love for apps can be fleeting. He equates downloading the latest trendy app – which might be recommended by a friend, family member, and a blog post or news story – to an impulsive shopping trip. Pew’s data shows that 68 percent of smartphone owners open only five apps – or less – per week. But Yu quickly points out that the apps with real “staying power, really do stick.”

It’s true that attracting loyal users – those that use an app repeatedly, register or make an in-app purchase – is an ongoing challenge for app marketers. But as Pew’s newly released study underscores, these valuable, loyal users are truly the key to building a sustainable mobile app business. Here at Fiksu, we’ve analyzed more than 11 billion mobile app actions and more than 200 million downloads to help quantify the cost of acquiring loyal users, while painting a big picture landscape of the trends impacting mobile marketers today. Our newly released December Indexes show that mobile app marketing continues to be a challenge – in fact, competition around daily download volumes reached an all-time high in December, along with mobile app marketing costs. But app promotion challenges don’t have to consume your entire life – or budget. We’ve developed a free eBook, based on numerous discussions with mobile app marketers, to help you navigate the challenging mobile ecosystem, avoid common pitfalls and effectively grow your mobile app business. We invite you to check it out!