5 Trends that Shaped Mobile App Marketing in 2019 | AppsFlyer
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Top 5 Data Trends that Shaped Mobile App Marketing in 2019

Avatar Shani Rosenfelder Dec 11, 2019

The mobile app economy is showing no signs of slowing down, as consumers are expected to spend a staggering $90 billion in the app stores alone in 2019. Growth remains robust at 20% year-over-year, according to App Annie.

To meet heightened demand and ensure visibility among a sea of competitors, apps are upping their investment in marketing, both in user acquisition and re-engagement. In fact, according to our forecasts, app install ad spend alone will eclipse $50 billion in 2019 — a 30% jump compared to 2018.

As the global leader in mobile attribution and marketing analytics, AppsFlyer has the largest data set in the market, measuring dozens of billions of installs in 2019. This scale gives us a unique view of the trends shaping the app marketing space.

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1) Non-Organic Installs: Apps are increasingly reliant on marketing to drive growth

2) Retargeting: Share of conversions up 35% in Non-Gaming, down 30% in Gaming

3) Monetization: In-app advertising is going mainstream across the ecosystem

4) Fraud: Gaming apps are guarding the front, but exposed at the rear

5) Programmatic: App install market grew 30% more than non-programmatic market 

BONUS! Subscription Economy: Surge continues, with gaming the next frontier

 

1) Non-Organic Installs: Apps are increasingly reliant on marketing to drive growth

In the last 5 years, we’ve seen the share of marketing-driven installs (AKA non-organic installs or NOI), take up a growing piece of the app install pie — largely the result of broken organic app discovery and the increased confidence in data-driven insights to inform smarter media buying.

According to our data, the smaller the app, the greater effect of this phenomenon. After all, small apps are unknown, meaning the likelihood of organic discovery in the app stores is almost non-existent. This leaves them with no other choice but to invest in marketing.

However, NOIs are also vital for large apps, with over 40% of installs, on average, driven by marketing efforts. Medium-sized apps upped their investment as well — almost 50% of their installs in 2019 were non-organic. 

A gaming vs. non-gaming analysis shows similar trends, with the exception of large gaming apps. These games increased their share of NOI by 25% in 2019, a 3x increase compared to large non-gaming apps. Supporting this finding, we’ve found that making it to the top 10% of gaming apps this year (by number of NOIs) required a 20% increase, or almost 800,000 installs. Because there are so many gaming apps, the top 10% club is a large one, and so is the top 5% group with a 1.8 million NOI threshold in 2019.

The continued rise of non-organic installs is seen not only in averages per app but also in industry totals. In fact, the share of NOIs among all apps reached 35% in 2019, 65% higher than 2017 and nearly 20% higher than 2018.

A view on NOI trends in top markets

A geo breakdown of app markets with the highest share of marketing-driven activity demonstrates the rise of India, with heightened demand to drive volume as the number of connected devices in this market is rising dramatically. According to International Data Corporation’s (IDC) Asia/Pacific Quarterly Mobile Phone Tracker, in the second quarter of 2019 alone, smartphone shipments to India increased to 37 million, up from 32 million in the previous quarter.

On the other end of the spectrum, as a mature market, the US share in the global NOI pie dropped by 12%, although the average spend per app slightly increased this year.

China is another interesting case. While the giant reached the #8 spot, it’s real ranking is much higher. In the absence of Google Play, there are hundreds of 3rd party Android app stores in the country, making measurement a daunting task due to extreme fragmentation. The fact that China is still number eight on our list, growing 20% in total NOI share and 16% per app, demonstrates advances in solving this measurement challenge, and that we at AppsFlyer are constantly improving the measurability of the market.

Other key regional findings:

  • Russia is enjoying significant growth in its share of the NOI pie (+21%), while the average per app remains the same. This indicates a much larger number of apps ran campaigns in Russia in 2019 compared to 2018.
  • Southeast Asian countries in the top 10 (Indonesia, Vietnam, and Thailand) all experienced negative growth in the 2019 pie — both in total share and average NOIs per app. This is likely the result of 1) a massive increase in the number of fraudulent installs that were blocked in 2019 in a region plagued by fraud, and 2) the fact that giant apps in Southeast Asia already have a huge user base resulting in budgets shifting from UA to re-engagement.
  • Brazil is growing at market rate after making its leap in 2017 and further growing in 2018.

Verticals and the 2019 NOI pie

2019 marked a distinct rise in the fintech category. Finance apps’ share in total NOI grew almost 60% in 2019 with average NOI per app rising by 15%.

The Travel category also showed considerable growth, especially in the average number of NOIs per app (+51%).

Riding the subscription economy wave, Entertainment apps stepped up their marketing efforts as well, growing 20% in both total share in the pie and average per app (more on this in the section on the rise of the subscription economy below).

Utilities and Health & Fitness apps saw investments dropping in both metrics over the course of 2019.

The power of gaming as the driving force of the app economy was demonstrated once again. Although the category dominates with over a third of the NOI market, its share of the pie continued to rise in 2019 (+10%). However, the install share of the second largest category — shopping — has dropped no less than 16%, while its average per app remained unchanged.

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2) Retargeting: Share of conversions up 35% in Non-Gaming, down 30% in Gaming

With a steady presence in the mobile ecosystem for years, it was only in 2018 that we started seeing the widespread adoption of retargeting in the app space.

The rise of retargeting can be attributed to the following factors:

  • Considerable churn, with average Day 30 retention rates ranging between 5%-10%.
  • Increasingly robust measurement and attribution on the app level with more comprehensive campaign performance data informing LTV-driven budget allocation.
  • The adjustment of bidding technology to the in-app environment.
  • The much less expensive cost of retargeting (in comparison to UA) along with the ability of marketers to generate an impressive increase in the average revenue per paying user (see chart below).

In 2019, app retargeting gained even more momentum.

The average share of retargeting conversions among apps running retargeting campaigns eclipsed the 50% mark of total marketing conversions (retargeting conversions plus non-organic installs).

By the end of the year, over 30% of apps will be running retargeting campaigns, a 16% increase year over year.

Category breakdown shows gap between gaming and non-gaming

Overall, we can see a positive trend but on the category level there were mixed results.

On one side, there is the massive gaming category which is trailing far behind in adoption and share of conversions. This is somewhat surprising as the use of retargeting can be beneficial for this vertical — at least as far as “reminding” players of games they once often played, and/or by providing incentives to pass a difficult level in a game in case of abandonment after multiple attempts.

What we often hear from these marketers is a concern about LTV measurement. It is therefore important to point out that there is a proven method to measure a retargeting campaign using incrementality. In addition, here’s a video with more tips on how to make retargeting work for Gaming apps.

Despite its low adoption rate, it was actually the gaming users who drove the best ARPPU performance, with over 50% increase among users exposed to retargeting campaigns.

In 2020, we predict the savvy and creative Gaming developers will lead the push forward in retargeting. We expect a host of new tools and methods to arise taking retargeting optimization to the next level. Given the nature of this industry, the rest will follow.

 

3) Monetization: In-app advertising is going mainstream across the ecosystem

Monetization strategies are complicated. While in-app purchases (IAP) was the largest and most common revenue stream, app developers were hesitant about blending advertising in their apps. They were concerned that ads would harm the user experience and decrease IAP conversion rate. 

Indeed, optimizing towards more payers and purchases, while spotting and nurturing big spenders has proven to be profitable. However, IAP revenue is only relevant for 5%-10% of the user base, not to mention the fact that turning a profit on the average user is often a long-term endeavour that could take months and even a year. 

And so, evolution in the industry brought in-app advertising to the forefront in 2019 as a legitimate method to monetize the non-paying users. This was massively and successfully executed by Hyper Casual games in the last 1.5 years, spreading across the mobile gaming ecosystem, and gradually blending within non-gaming verticals as well.

Our data shows that the number of non-gaming apps adding ads to their monetization mix grew by 127% in 2019, generating a 47% increase in the share of overall revenue generated by ads.

Among gaming apps, where ads already run at scale, there was a 75% jump in the number of apps that embedded IAA within their flow, leading to a 14% year over year increase in the share of ads in the revenue pie. 

Furthermore, according to our State of Gaming 2019 report, Core games experienced the largest increase — 34% higher comparted to 2018, reaching over 30% of overall revenue.

While many app developers are able to maintain a solid business on in-app purchases alone, it is more than possible, and even recommended, to blend advertising while ensuring no harm is done to the app’s flow and user experience.

 

4) Fraud: Gaming apps are guarding the front, but exposed at the rear

Mobile app install fraud continued to be a significant polluter of data in 2019. While fraud is transitioning toward automated and programmatic, bot-based fraud, a newer form of mobile fraud emerged — in-app and purchase fraud.

This fast-growing method of attack demonstrates the sophistication of bad actors in the mobile ecosystem. The complexity and diversity of post-install events are fertile ground on which fraudsters thrive, manipulating developers in ways that are increasingly harder to detect.

In-app fraud is perpetrated on several levels:  

1) Receiving CPA payment offered by advertisers for user engagement across post-install events and purchases.

2) Falsely presenting fraudulent installs of fake users as legitimate by simulating a journey of an engaged user who interacts with the app, effectively whitewashing the fraudulent install.  

As fraud methods evolve, the implications on marketing budgets intensify with an expected growth in financial exposure to fraud. We estimate that $4.8 billion will be financially exposed to app install fraud in 2019.

Fraudsters are naturally attracted to a combination of high volume and high payout, putting the Finance and Shopping verticals at the greatest immediate risk, with 550% and 225% (respectively) above the average industry exposure.

In 2020, new fraud tactics will inevitably surface, with improved versions of install hijacking and different bot types a likely scenario, challenging the mobile ecosystem yet again. 

In-app fraud is also likely to spread as marketers measure more in-app events and adopt Cost Per Action (CPA) models in greater numbers. With CPA tied to an in-app event being the reward, fraudsters will follow the money trail.

 

5) Programmatic: The app install market grew 30% more than the non-programmatic market 

Programmatic media buying has been around for over a decade, and has been playing an integral role in web advertising — desktop and mobile web. Overall, programmatic is projected to attract $70 billion of ad spend in the US alone in 2020. 

In 2019, the growing interest in IAA turned in-app bidding into a hot topic, indicating heightened demand to develop programmatic solutions to better manage the demand-supply trade in the in-app environment. Indeed, Mobile Demand Side Platforms and mobile ad networks needed to quickly adjust themselves and pursue sophisticated solutions to overcome obstacles such as in-app scale, difference in real time bidding protocols between web and app, and more. 

When it comes to the role programmatic is playing in app install campaigns specifically, we have found that the number of attributed installs of leading mobile DSPs grew by nearly 60% — 30% higher than the non-programmatic market. That said, programmatic still holds only a very small percentage of the total app install market. 

In-app bidding became a key feature for Gaming developers, gradually turning into a ‘must-have’ for Gaming platforms competing for the top apps. As a result, offerings were enhanced this year through acquisitions and development (for example, Applovin launched MAX in-app bidding monetization solution and ironSource launched LevelPlay).

Mediation technology requires heavy R&D lifting, and the fact that such strong players in the market invested heavily in this area clearly demonstrates that programmatic is more than a trend. As such, we expect to see its continued growth and evolution in the near future.

 

BONUS! Subscription economy surge continues, with gaming the next frontier

In 2018, we witnessed the subscription economy take off with a 5x increase in the share of apps measuring subscriptions. Over the course of 2019, this number rose by nearly another 2x. In addition, there was a 150% increase in subscription revenue among the same apps measuring this revenue stream in both 2018 and 2019.

The use of subscriptions to drive revenue is widely employed by streaming apps, as well as by Dating and Health & Fitness. But the largest increase in subscription revenue in 2020 is expected to come from the gaming side of the spectrum with the introduction of Google Stadia and Apple Arcade. After the rise in the use of ad monetization as a legitimate revenue stream, even among Core genres, the introduction of another source of revenue is expected to drive gaming apps to even greater heights. 

 

Report contributors:

Igal Frid, Mobile Insights Specialist (LinkedIn, Twitter)

Michel Hotoveli, Fraud Expert (LinkedIn, Twitter)