How We Used Search Ads To Generate “Profits”
tl;dr Apple Search Ads were the only ads with a CPA that fit our business model. Demand stayed after we stopped running them.
As a purveyor of a clock app utility that was a REALLY late entry (Oct 2016) to the the app store game my primary barriers to selling are getting noticed in an already crowded field of clock apps. For this reason, attracting customers via ads has a huge appeal. What follows is an overview of what we’ve tried, what worked and what didn’t and how we were successful in generating “profits.” (I put it in quotes because it was an experiment and the amounts were so little I hesitate to call it profit!)
Our app, Chimed - The Superior Multiple Alerts & Timers App, is a clock utility app that provides additional features beyond the default iPhone clock app. It can be downloaded for free and includes a $2.99 In-App Purchase “Pro” feature that allows for upgraded functionality.
We initially launched Chimed on October 5, 2016 and when we started looking at the metrics it quickly became clear that we’d made our first mistake. Like most beginning entrepreneurs we started by telling our family and friends about the app. And being the good family and friends that they are they started downloading it and upgrading it to support us. Although that was super appreciated and nice it threw off our metrics! Turns out that my mom is much more likely to pay for an In-App Purchase than a customer that downloads and uses the app to solve a problem. And THAT was the important data we wanted to get. Having that data in the same bucket as downloads and purchases from friends and family members isn’t worth the small amount of money generated. Lesson learned: Encourage your family but ask them NOT TO BUY! They’ll wonder how you could possibly ever make it when you discourage people from purchasing but live with it. They probably think you’re crazy anyway.
After we worked through initial family and friends we quickly realized that we needed to drive more downloads because organic app store search was so small. Trying out Ad Words, Facebook Ads and Twitter Ads we quickly realized that their ad models weren’t going to work for us because we were paying well over $1 per user acquisition (I think I paid more than $2 for some ad words aquisitions!) and because our app was free to download and only $2.99 for a “Pro” upgrade (of which we get ~ $2.10) we were only making about $0.16 - $0.20 per downloaded app. Didn’t take long to realize that paying 5-10x our customer value to acquire a customer was NOT a sustainable business model.
First Monetization Pivot
After our initial results we decided to try a different approach to the monetization strategy. Although I really don’t like ads I thought it might make sense to do a monetization approach where a free version came with ads and full functionality and you could pay $2.99 to remove the ads. The thought was to test whether or not the ads could generate significant revenue for non-paying users. This was a quick test, the answer was - quite quickly - it could not.
Maybe it’s our app (where most of the time is spent outside of the app waiting for an alert) and maybe it’s because we didn’t have many users but the revenue generated from ads was super small and - quite honestly - any dollars generated from the ads might’ve been by our users making a mistake. So there was no real revenue generated by the non-paying users. What’s worse is that the rate of people upgrading to the “pro” version dropped from ~5% of users to basically zero. In our case, people were okay with ads and the ads generated no value. We pivoted back to our original “Pro” upgrade model.
An Unexpected Bump
So then we let it ride. For a couple of months. No ads. We got few downloads and my focus was on our next app. Then, pretty much out of nowhere at the start of February I noticed that our upgrade rate (per download) had increased so that from 1/28/2017-2/6/2017 the app was installed 66 times and in that same period we sold 10 pro upgrades. The conversion rate was now at a respectable 15%. Each user was now worth approx $0.32 to us. It was time to revisit the search ads.
And so we started to run search ads. Trying to keep the CPA below $0.20 (with a chance at a $0.12 profit). Initial cost was > $0.32 and so we were losing money on the first couple days. But eventually we got our CPA down to about $0.10. However, that 15% conversion rate did not stick. But we were still doing okay. (Micro profit)
No More Ads. Traffic Holds. Bigger “Profits.”
After a few weeks of running ads I decided to see what would happen if I turned it off. I was expecting to go back to the downloads and conversions we were running before the last few weeks of ad campaigns. Although the amount of downloads and purchases dropped it wasn’t significant. It stayed closer to the new levels than the old levels (even without ads). And because the ads were no longer being used (and it was just natural search traffic) we returned to the higher conversion rates for upgrades. Finally we were making a profit. A small one but a profit nonetheless.