Mobile Marketing Costs Spike in November While App Downloads Drop

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

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