App Analytics: What Is It And How Does It Change The Playing Field?
Recently, Apple launched its beta campaign for iTunes Connect App Store Analytics. It’s Apple’s new proprietary tool for measuring conversions on an apps page in the App Store and tracking user behaviour and engagement within the app.
The new tool has sparked interest in the app community. It’s available on a first-come first-serve basis, which usually means there’s a healthy (or unhealthy?) amount of buzz around it.
The App Analytics industry is a highly competitive one. Googling for the simple term “app analytics” gives a multitude of toolsets:
- App Annie, analytics insights based on scraped data from the App Store
- Flurry, a framework to measure in-app statistics
- Google Analytics, a framework that is similar to Flurry, from the analytics behemoth itself
- Parse, offering a complete app analytics suite in addition to cloud storage and push notifications
All these tools offer similar functionality, but all do so in their own fashion. Parse offers a complete product set, App Annie simply knows every data point in the app industry, and Google Analytics and Flurry will track every possible in-app metric.
In such a competitive zero-sum market, how is App Analytics from Apple going to make a difference? Well, let’s look at the most valuable metrics first.
Cost < Revenue: Conversion
The term conversion simply means: how many people go from A to B, where A is a certain spot where your target demographic hangs out, and B is the money-generating place of your choice. You can direct users from a Facebook advertisement (A) to your app sales page (B), or from your app sales page (A) to a successful app install on a users device (B). The percentage of users that successfully makes the step from A to B is called the conversion rate.
Say you show a 100 users an app advertisement on Facebook for $ 50. Of those 100 users, 10 install your application. It’s a conversion rate of 10%, with a cost per acquisition (CPA) of $ 5. Then, if you have a method of generating revenue from those acquired users and you track the purchases they make (or in-app advertisement clicks), you could find that these 10 users will collectively bring in $ 100. When you trace that back, you’ve spent $ 50 to generate $ 100. That’s a return on investment (ROI) of 200 %.
If you can predictably generate these results over and over again (with a slight deviation), you can tweak your conversion rates. If you spend double the amount on advertising, you make twice that amount back. But if you manage to reach twice as much users with your $ 50 (i.e. cheaper cost per click) and retain the conversion rate, you make 4 times as much.
Ultimately, you’ll want to increase the conversions within the sales process. It’s much easier to optimize your app page in the App Store (with better copy, screenshots and reviews) than it is to get cheaper advertisements. And, within your app you can optimize too: how many users make it to the checkout page or Point-Of-Sale? Increase those numbers and you’ll see your revenue go up.
Customer In > Customer Out: Growth And Churn Rate
It’s true that acquiring a new user is much more expensive than keeping a current customer.
To acquire a new user you have to spend money, either on direct advertising or on building up a content marketing strategy. Keeping an existing user is a matter of keeping them engaged, which usually costs less. Also, your business only grows when two new customers get acquired when one steps out the door.
These two metrics are known as growth rate and churn rate. They’re relatively simple: the former is the amount of users you acquire over a certain time period, and the latter is the amount of users you lose over that same period. For your business to thrive as a whole, your growth rate must be greater than your churn rate.
Churn rate only applies to businesses that sell repeatedly. There’s no point in measuring churn rate for a one-off product-based business, such as selling high value items that are bought once in a lifetime. Still, businesses like book shops and car dealers wish to retain their clientele to make future sales possible.
Engagement And Life Time Value
The ultimate metric in analytics is engagement. It’s an intuitive term, fluid, and hard to express in simple numbers. How do you measure engagement?
A few examples:
- Your app is engaged for 50% of its potential if half of your customers opens it in a certain period.
- The engagement of one single user is 100% if he completes 4 tasks within your app (i.e. open the app, create an account, shop for items and marks one article as a favourite).
- A users engagement is 100% if he or she opens the app in a certain period, and is then 200% if he or she opens the app again before the expiry of a next period.
User engagement is highly influenced by gravity, i.e. over time the engagement of a user will inevitably fall unless you do something to counter that. Ultimately, engagement is determined by churn rate. Your business can grow in terms of newly acquired users, and that growth can even exceed your churn rate, but if you cannot keep a user engaged for a multiple of periods, your engagement is still low.
In the end, the engagement of your users determines the Life Time Value (LTV) of a user: how much revenue does a single customer bring in during its time with your business?
Say you’ve acquired 12.000 new users in one year (evenly distributed), and the engagement in a 1-month period is 50%. In other words: after 1 month you lose 50% of the customers you acquired in that period. The next month you’ll be left with 25% of the originally acquired users, and after 3 months with 0%. Any user will stay on for a maximum of 3 months, so that’s the time you have to sell them something. On average, how many users do you have each month?
- On January 1st you get a 1000 new users.
- On February 1st you have a 1000 + 500 = 1500 users.
- On March 1st you have a 1000 + 500 + 250 = 1750 users.
- On April 1st you have … a 1000 + 500 + 250 + 0 users.
Each and every month you end up with 1750 users on average, given that you don’t count the first 3 and last 3 months of any business period longer than 6 months (or assume you hit the ground running).
Keeping your level of engagement high is the ultimate lever in retaining your current business. Upping the engagement will increase the LTV of a single user, and will make your ROI from a user acquisition higher.
How Is App Analytics From Apple Going To Change This?
All current analytics tools will give you a perfect insight into churn rate, growth rate, engagement and a number of less important metrics. The tools measure events per single user, and can base engagement of off that. When you combine that data with your Facebook Ad spending, you can effectively determine the cost and revenue of a single user.
The conversion of the App Store itself! Right now, there’s no way you can measure how well your App Store page is performing. You can try it out of course, change a thing and see if conversion go up. But can you reliably measure it? No.
Thanks to this gap in the whole chain, from Facebook Ad to a customer leaving your business, you can’t effectively measure the lifetime of a single user. Apple has mentioned you can do the following things with their new product:
- See how often customers visit your app’s page on the App Store
- Find out how many of your users open your app over time
- Create custom campaign links and follow the success of your marketing campaigns
- Understand which websites refer the most users
The before-last is the most important: you can connect a campaign to a particular link, so you can track which users from which campaigns install your app. Combine that with a before-install web cookie and you can effectively track a single user from before acquisition all the way into the app.
(Note: users with a paid iTunes Connect can sign up for App Analytics here.)
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