Mobile App Industry Survey: What's Ahead for App Marketing in 2017

Mobile App Marketer INDUSTRY TRENDS SURVEY

What's Ahead for 2017

Survey Objectives and Design 3Executive Summary 6App Marketer Insights 12App Marketing Trends 18 Platform Usage 31App Marketer Opinions 33About Us 45

TABLE OF CONTENTS

Copyright © 2016 All rights reserved worldwide. | www.apsalar.com

3

OBJECTIVES AND DESIGNSURVEY

4

Provide a view into the collective thinking of marketers for both pure-play app companies and other businesses active in the app space.

� What categories and regions are they focusing on?

� What strategies are they using to drive growth on theirbusinesses?

� What sorts of tools and solutions are they using toenable data-driven marketing?

� How do they expect to invest their marketing dollars inthe future?

� What are their primary KPIs?

� What are their opinions and concerns regarding fraud,UA costs, and measures of user quality?

Provide specific insights into the following:

Mobile App Marketer Survey Objectives

4

5

� Quantitative survey � Email invitation delivered to a broad cross-section of app marketers � 50% based in the US/50% outside the US � $10 Red Cross donation and a copy of the complete survey results were offered as an incentive to respond � Total respondents: 146

Research Design

5

Brand Marketers

88%

Agency Professionals 12%

Middle Management

39%

Practitioner

23%

Exec/Sr Management

34%

Don't Know 4%

6

EXECUTIVE SUMMARY

7

EXECUTIVE SUMMARY

APP MARKETER CHARACTERISTICS

App marketers are pioneers, with a high degree of knowledge about their field Most have 4 years or less in the field

¾ rate their knowledge of the field as strong or expert level

Marketing teams responsible for apps tend to be small65% say their teams have 5 people or fewer

Just 8% say that their teams contain more than 20 marketers

Most common target regions for apps managed by our marketer sample were regions with stronger economic development and large English-speaking populations

North America, EU, India, A/NZ and LATAM were most popular target regions

8

EXECUTIVE SUMMARY

APP MARKETING TRENDS

Advertising and in-app purchases were the most common revenue streams

As has been shown in other studies, paid apps play a small role Advertising is leveraged by almost half of app businesses to drive revenuePurchases of real world and virtual goods were the next most popular revenue streams 34% leverage more than 1 revenue streamFor games, IAPs dominate, but advertising also plays a major role

CPI is still king in mobile app media buying, with more than ¾ of marketers reporting they use it for at least part of their spend

Next most popular is CPA, as more media companies address the historic scaling issues with this modelMore than a third of marketers report leveraging CPC despite the extremely high rates of click fraud in app user acquisitionMore than half of marketers say they leverage 5 media vendors or fewer, but just under half say that they have increased the number of media partners they work with over the past year

9

Marketers report that they expect to make changes in the way they spend marketing dollars over the next 12 months

Most report that Mobile display spend will hold steady or increase

Many expect to spend significantly more in video, content marketing, search, influencer marketing and ASO to drive UA

Traditional media and incentivized are likely to decline as a share of total spend in the months ahead

Remarketing is set to grow rapidly in the months ahead58% say they have at least tried remarketing, and another 28% say they plan to in the next 12 months

Majority of marketers report trial of and/or interest in remarketing

Share of spend level remains modest but appears poised to explode

EXECUTIVE SUMMARY

10

PLATFORM USAGE

In-app analytics and attribution tools are the most commonly used platforms for mobile app marketers

85% of marketers say they use an in-app analytics tool

69% of marketers say they use an attribution platform

Strong interest in ASO tools, with more than 80% using or planning to use in the next 12 months

With modest growth rates expected for attribution and in-app analytics sectors, players in these spaces will likely need to drive brand switching in order to grow their businesses significantly

Marketing automation, A/B testing and app performance measurement tools are all expected to grow rapidly in next 12 months

EXECUTIVE SUMMARY

11

MARKETER OPINIONS

Most marketers say it’s getting tougher to drive installs in their category(ies)More than 2/3 say that installs are getting more expensive to drive

Just under 2/3 say that it is getting harder to drive installs

Marketers much more concerned about user quality and monetizability81% say that revenue matters more than UA counts in their KPIs

78% say user quality matters more than it did a year ago

Majority report strong attention to LTV, retention rates and uninstall rates for optimization

Marketers are very concerned about fraud and fraud readiness75% concerned about the costs of fraud to their business

Less than 20% strongly agree that their companies have a good handle on how to address fraud challenges

Just 11% strongly agree that their companies have made sufficient investment in protecting their businesses against fraud

EXECUTIVE SUMMARY

12

MARKETER INSIGHTS

13

APP MARKETERS ARE TRAILBLAZING THEIR NASCENT DISCIPLINE;80% HAVE 4 YEARS OR FEWER OF MOBILE APP EXPERIENCE

“How long have you been working in the mobile app space?”

40%

35%

30%

25%

20%

15%

10%

05%

0%

13%

32%35%

20%

Less Than 1 Year 1-2 Years 3-4 Years 5+ Years

14

63%

53%

43%

33%

23%

13%

3%

22%

52%

21% 2% 1%

I am an app marketing expert

I am very knowledgeable but not an expert

I have some app marketing knowledge

I am new to mobile marketing

I dont know/prefer not to say

How would you assess your own knowledge of the mobile app industry and mobile app marketing?

APP MARKETERS ARE VERY AWARE OF WHAT THEY KNOW … AND WHAT THEY DON’T

About 3/4 of marketers rate themselves as at least “very knowledgeable” about the industry

But less than one quarter call themselves experts – likely because they are continuously “learning on the job” in a constantly evolving space.

15

70%

60%

50%

40%

30%

20%

10%

0%

64%

14% 12% 4% 0% 3% 3%

1-5 people 6-10 people 11-20 people 51-99 people 100+ people Don’t know/unsure21-50 people

MOST APP MARKETING TEAMS ARE COMPACT; MEMBERS MUST PLAY MANY ROLES

“About how many people are responsible for app marketing in your company?”

About 2/3 of marketing teams have five or fewer people

16

APP MARKETERS PRIORITIZE US/CANADA, EU, AND ENGLISH SPEAKING REGIONS (INDIA, ANZ)

“In which region(s) do your apps compete?“

7%

16%

25%

28%

35%

35%

38%

47%

63%

Other

China

Japan

Southeast Asia

Latin America

Australia/NZ

India

European Union

US/Canada

0% 10% 20% 30% 40% 50% 60%

17

APP MARKETERS SURVEYED PROMOTE A BROAD RANGE OF APP TYPES

“In which app category(ies) do your apps compete?”

Education

23%Shopping & Retai

20%Lifestyle

15%Utility

14%Travel

19%Other

12%Education

10% 10%Kids

& Media

6%Food

& Drink

5%Don’t Know

Gaming, shopping, lifestyle, utility and travel apps were most well represented in our sample, in keeping with general industry trends

Social

22%Games

18

APP MARKETING TRENDS

19

WIDE VARIATION IN AVERAGE MONTHLY APP MARKETING EXPENDITURE

Average monthly marketing spend per app ($USD)

51% 27% 23%Up to $25K $26K-$100K $101K+

About a quarter of marketers reported heavy spend rates of more than $100K per month – the industry “whales”

But more than half reported spend rates of less than $25K per month

20

MOST COMMON MONETIZATION APPROACH: IN-APP ADVERTISING

“What is the primary revenue stream(s) for your company’s app(s)?”

32%32% 32% 24%

Advertising is the most common revenue source for our sample of app businesses

34% of apps have multiple revenue streams

Having multiple streams is increasingly common as a way of “hedging bests” and maximizing profitability, particularly for apps targeted to multiple international regions where different monetization strategies have varying levels of effectiveness

Virtual Goods IAPs

Virtual Goods IAPs

Real Goods Purchases

Service Subscriptions

46%In-App

Advertising

21

DEVELOPING MARKETS MORE LIKELY TO RELY ON ADVERTISING MONETIZATION

Percent of app marketers that identifiedadvertising as a revenue stream for their businesses

36%61%

Apps in developing economies rely more on advertising, enabling users to “pay with attention” versus shelling out cash

Apps in developed economies far less likely to have ads, especially outside of the gaming and media/entertainment genres

US/Canada, EU. ANZ, SEA, Japan, Korea

China, India, LATAM

22

IN GAMING, HEAVY RELIANCE ON VIRTUAL GOODS FOR REVENUE;ADVERTISING PLAYS A SECONDARY REVENUE ROLE

Percentage of gaming marketers who say their businessesare using this revenue stream

64%91%

IAPs nearly ubiquitous, leveraged by more than 9 out of 10 game businesses

Strong usage of advertising as well.

Very consistent with historic patterns, particularly for freemium titles

While, several years ago, game companies often incorporated advertising later in the product life cycle or not at all, these days it is a key element in monetization

Virtual GoodsIAPs

In-AppAdvertising

23

FOR APP PROMOTION, “WORKHORSE” DISPLAY ADVERTISING HOLDING ITS OWN EVEN AS SPENDING FLOWS TO NEWER MEDIA CHANNELS

Video, Paid Search, Content, ASO, and Influencer marketing slated to grow in the next 12 months

Display spends looks to stay steady in the months ahead

Traditional media and incentivized installs may decline as a share of total spend as concerns over accountability and user quality grow

Mobile Display Banners Mobile Video

Paid Search (Including App

Stores)

Incentivized Installs Traditional Media Email Marketing Content Marketing App Store

OptimizationInfluencerMarketing

Will Spend More 24% 47% 55% 18% 14% 20% 29% 38% 42%

Will Spend About the Same 39% 22% 23% 26% 25% 39% 31% 37% 23%

Will Spend Less 18% 8% 6% 33% 27% 15% 14% 6% 7%

Don’t Know/Unsure 20% 24% 17% 24% 35% 26% 25% 19% 28%

“We would like to better understand how you plan to invest marketing dollars over the next 12 months. Please tell us if your company is increasing spend, keeping spend about

the same, or decreasing spend in the following areas.”

24

“Video advertising will represent a growing share of mobile app marketing spend in the future.”

Somewhat Agree,

36%

Strongly Agree

21%

Don’t Know 9%

Strongly Disagree 3%Somewhat Disagree 8%

Neither Agree Nor Disagree

23%

57% EXPECT VIDEO TO PLAY A LARGER UA ROLE IN THE FUTURE

25

2 OF 3 OF MARKETERS ARE INTERESTED IN LEVERAGING APP STORE SEARCH ADS

“Our team is already using or plans to use the new app store search ads from Apple and Google.”

Strongly Agree, 38%

Somewhat Agree, 24%

Don’t Know

17%

Neither Agree Nor Disagree, 16%

Somewhat Disagree, 3%

Strongly Disagree, 2%

26

CPI MEDIA BUYING LEADS, OTHER PRICE MODELS ARE GAINING SHARE

STORE SEARCH ADS CPI is used by three quarters of marketers, and CPA has become very popular as well, with almost 6 in 10reporting they use it for at least part of their plans

CPC is used by more than a third of respondents despite the extremely high levels of click fraud in the category

“Which buying model(s) does your company use for paid app user acquisition marketing?”

75%Cost

Per Install

57%Cost Per Action

(e.g., Registration, Lead

37%Cost Per

Click

37%Cost Per

Thousand

2%Cost Per Purchase

2%Cost Per Purchase

Education3%Hybrid Model

6%Don’t Know/

Unsure

27

MOST MEDIA BUDGETS SPAN 5 OR FEWER PARTNERS; LESS THAN A QUARTER USE MORE THAN 10

STORE SEARCH ADS“How many media partners marketers do you work with?”

35%

30%

25%

20%

15%

10%

5%

0%

5%

20%

54% 29%

22%

10%

5%8%

None 1-2 3 to 5 6 to 10 11 to 20 21 + Don’t Know

28

ALMOST HALF ARE SPENDING WITH MORE PARTNERS

While the TOTAL number of media networks in the app industry is in long-term decline (from 1000+), almost half of marketers say they have INCREASED the number of partners they work with

Versus one year ago, are you working with more media companies, about the same number or media companies, or fewer media companies?

48%

16%

MORE37% SAME

FEWER

29

ALMOST 6 IN 10 BUY ADS TO RETARGET EXISTING APP USERS; CLOSE TO 90% EXPECT TO WITHIN A YEAR

“Do you field re-engagement or retargeting campaigns for apps? “

70%

60%

50%

40%

30%

20%

10%

0%

58%

Yes

28%

No But Plan to inNext 12 Months

5%

No and No Plans to

9%

Don’t Know

30

TO DATE, MOST APP REMARKETING INVESTMENTS ARE MODEST IN SCALE

“About what percentage of your total app marketing budget is allocated to re-engagement/retargeting?”

3%

1%

1%

13%

23%

31%

28%

51-100%

31-50%

21-30%

11-20%

6-10%

0-5%

Don’t Know

0% 5% 10% 15% 20% 25% 30% 35%

31

PLATFORM USAGE

32

App Performance Measurement (e.g., New Relic, App Dynamics)

A/B Testing (e.g., Optimizely, Swrve, Leanplum)

Mobile Marketing Automation (Leanplum, Kahuna, Urban Airship, Swrve, Localytics)

App Store Analytics (e.g., App Annie, Sensor Tower)

Mobile App Attribution (e.g., Apsalar, Kochava, Appsflyer)

In-App Analytics (e.g., Localytics, GA, Mixpanel)

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

APP-FOCUSED SAAS PLATFORMS INCREASINGLY POPULAR

“We’d like to understand what sorts of tools your company uses for app marketing. Please tell us which of the following types of tools your company uses or plans to use in the next year.”

85% 7%

69%

65%

37%

31%

20%

9%

17%

23%

25%

24%

In-app analytics and attribution are most established platform types and expected to continue to grow

App Store Analytics tools expected to grow its penetration significantly over the next year

MMA, A/B testing and app performance tools appear poised for growth in next 12 months

(Grey and Orange = Currently Use. Black = Plan to Use in Next Year)

33

MARKETER OPINIONS

34


67% OF MARKETERS AGREE UA COSTS ARE RISING RAPIDLY

“The cost to drive an install in my category(ies) is increasing rapidly.”


Strongly Disagree, 1%Don’t Know, 8%

Somewhat Agree,

43%

Strongly Agree,

24%

35

65% SAY DRIVING INSTALLS NOW MORE DIFFICULT

“It’s getting more difficult to drive installs in my category(ies).”

Somewhat Agree,

41%

Neither Agree Nor Disagree,

20%

Strongly Agree,

24%Somewhat Disagree, 7%


Don’t Know, 6%

36



84% PRIMARILY FOCUS ON REVENUE KPIS, NOT INSTALL COUNTS

“My professional goals are primarily focused on achieving revenue targets versus delivering specific install counts.”

Somewhat Agree,

37%

Strongly Agree,

47%

Don’t Know, 6%Somewhat Disagree, 4%

37

78% CARE MORE ABOUT USER QUALITY NOW VS. A YEAR AGO

“Our team is more focused on the quality of installs than we were a year ago.”

Somewhat Agree,

28%


Strongly Agree,

50%Neither Agree Nor Disagree, 11%


38

84% ANALYZE PARTNER/CAMPAIGN RETENTION RATES AS A KPI TO OPTIMIZE UA EFFORTS

We carefully consider retention rates for installs driven by different media partners and channels in order to optimize our spending.”

Somewhat Agree,

37%

Strongly Agree,

47%




39

54% ANALYZE PARTNER/CAMPAIGN UNINSTALL RATES AS A KPI TO OPTIMIZE UA EFFORTS

“We carefully consider uninstall rates for installs driven by different media partners and channels.”

Somewhat Agree,

33%

Strongly Agree,

21%




40

80% ANALYZE PARTNER/CAMPAIGN LTV & ROI AS KPIS TO OPTIMIZE UA EFFORTS

“Our team closely tracks the cost of acquiring a user relative to the lifetime value of that user.”

Somewhat Agree,

37%

Strongly Agree,

43%




41


Don’t Know, 3%

78% HAVE CONCERNS ABOUT THE COSTS OF APP FRAUD

“I am very concerned about the costs of fraud in the app category.”

Somewhat Agree,

36%

Strongly Agree,

42%



42




64% OF MARKETERS HAVE SOME UNDERSTANDING OF HOW APP FRAUD IS PERPETRATED

“I have a strong understanding of how fraud is perpetrated in the app industry.”

Don’t Know, 4%

Somewhat Agree,

44%

Strongly Agree,

20%

43

Somewhat Disagree,15%


LESS THAN 20% STRONGLY AGREE THAT THEIR COMPANIES KNOW HOW TO ADDRESS FRAUD

“My company has a good handle on how to address app fraud and protect our business from fraudsters.”

Neither Agree Nor Disagree,17%

Don’t Know, 8%

Somewhat Agree,

34%

Strongly Agree, 20%

44

Somewhat Disagree,10%


Strongly Agree, 11%

ONLY 1 IN 10 STRONGLY AGREE THAT THEIR COMPANIES HAVE MADE ADEQUATE INVESTMENTS IN FRAUD PROTECTION

“My company has made adequate investments to protect our app businesses from fraud.”

Don’t Know, 9%

Somewhat Agree,

28%Neither Agree Nor Disagree,

29%

45

ABOUT US

Apsalar is the leading mobile app marketing measurement and optimization company that helps app marketers drive maximum return from all their marketing investments. With Apsalar Attribution and

Audiences, app marketers can optimize their media allocation and empower their partners and platforms to deliver customized communication, for better results and monetization at every step in the customer journey.

About Apsalar: Better Matters™

App MediaAttribution andOptimization

App Audiencesfor

Remarketing

App CRM and Prospecting Audiences

L E A R N M O R E

[email protected] or visit our website at https://Apsalar.com

CONTACT PERSON

Jim NicholsVP Marketing and Insights

[email protected]

Copyright © 2016 All rights reserved worldwide. | www.apsalar.com

Thomvest is an early-stage venture capital firm with over $250 million under management. We primarily focus on opportunities in Silicon Valley with early stage B2B startups in the fields of financial technology, mobile ad-tech, SaaS, and security. The capital we invest is our own, enabling us to be more creative, flexible and patient with our entrepreneurial partners. More than two-thirds of the companies we have funded in the last decade have either gone public, been acquired, or continue to grow as independent businesses.

About Thomvest

L E A R N M O R E

[email protected] or visit our website at www.Thomvest.com

CONTACT PERSON

Nima WedlakeAssociate

Thomvest Ventures

[email protected]