What is performance marketing? 4 tips for app marketers

In this installment in our Mobile UA 101 series, we’ll explain how performance marketing changed the game for app marketers.

Need a primer on mobile game and app marketing? Check out Mobile User Acquisition 101: A Beginner's Guide.

Not so long ago, marketers simply purchased ad space and hoped for the best — with no guarantee of views or conversions. Today, thanks to the predominance of digital media, performance-based marketing has completely transformed the field. Performance marketing is particularly valuable for app marketers, as it lets them distribute ad spend efficiently, focus on specialized audience segments, and optimize campaigns for post-install events. As a result, performance campaigns generate higher returns for every dollar of ad spend.

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What is performance marketing?

1. Choose a performance metric that matches your goal
2. Use the right performance marketing channel
3. Target and acquire specific user segments
4. Test new channels and diversify

What is performance marketing?

Performance marketing is a digital marketing approach in which advertisers only pay for guaranteed installs, actions, or engagements. Some common examples of conversion points include:

• Ad clicks
• App installs
• Video views (often 25% completion or more)
• Completing secondary in-app actions (registration, in-app purchase, etc)

Unlike traditional campaigns in which advertisers pay for impressions (displaying one pixel or more on the screen), merely serving an ad will not impact advertising spend. This approach guarantees that advertisers will only pay for conversion events that meet specific goals.

To ensure that performance marketing campaigns are effective, app marketers should keep the following techniques in mind:

1. Choose a performance metric that matches your goal

App marketers can’t choose just any performance metric. You have to set specific targets for new user volume, in-app purchases, retention, and more. Every app will be different, but your goals should all come back to one essential metric: ROAS. ROAS, which stands for “return on ad spend,” is calculated by subtracting the average cost to acquire a user from the revenue that the user generates. For casual games that rely on in-app ad monetization, attracting a high volume of users may be the key to ROAS. Meanwhile, for a rideshare app, securing that first ride could be crucial.

Here are a few examples of performance marketing metrics for app marketers:

• Clicks: The traditional click was the standard metric for desktop-based web browsing, but it still holds value today. Under CPC (cost-per-click) campaigns, advertisers pay every time a user taps or otherwise interacts with an ad.

• Video Views: As mobile advertisements rely increasingly on video formats, cost-per-view campaigns are replacing the traditional cost-per-impression views of desktop web advertising.

• Installs: The goal for most mobile campaigns is to convince users to install an app. For that reason, cost-per-install is the most commonly-applied performance metric in mobile app industries.

• Actions: Cost-per-action is a broad metric relating to any campaigns with pre-defined conversion events outside of others on this list. Some common examples include registering in-app, or completing a level in a mobile game.

• In-app purchases: Finally, cost-per-sale campaigns allow advertisers to pay based on completed transactions. For app marketers, that means successful in-app purchases. These ads guarantee revenue for marketers but are also the most expensive to deploy.

These campaign types represent the entire marketing funnel from initial impressions to final sales. As such, the cost of each advertisement will vary — clicks will be frequent and relatively inexpensive, while in-app purchases will be costly but guarantee revenue. For that reason, campaign goals should reflect those of your overarching UA strategy.

2. Use the right performance marketing channel

Just because performance marketing is effective doesn’t mean all performance-driven campaigns are the same. App marketers will need to target specific channels based on their goals. Here are a few go-to channels for UA managers:

• Mobile DSPs: Mobile DSPs or demand-side platforms give marketers access to a vast programmatic ecosystem of mobile ad supply. DSPs facilitate real-time bidding (RTB) based on specific factors, such as audience targeting and conversion probability. They use machine learning to predict which users will be the most valuable in advance, allowing you to quickly acquire quality users at scale.

• Rewarded ad networks: Sometimes called “incentivized CPI,” these networks can help grow traffic quickly over a short period of time. For the best results, find out if you can pay for completed in-app engagements (CPE model), versus installs alone.

• Paid search ads: Search ads guarantee that when a user searches for keywords related to your app, you’ll appear at the top of the results. These ads are typically priced on a pay-per-click basis. Apple search ads within the app store can be effective for app marketers, with Google being the next best bet.

• Social media networks: Social media ads can be effective, though in recent years, competition has driven costs higher. In general, it’s best to avoid relying on these networks exclusively. 

3. Target and acquire specific user segments

Performance marketing isn’t just cost-effective; it’s highly-focused and targeted. Thanks to modern digital capabilities, app marketers can target specific audiences through the channels described above. What’s more, they can monitor how users engage with ads and use those insights to optimize future campaigns.

To make the most of these capabilities, UA managers should target specific user segments. Better still, they can use machine learning to predict how new users will behave in-app. Where traditional advertisements might be limited to a broad demographic such as age or gender, performance marketing channels can typically target specific personas and “lookalike” audiences. When combined with digital marketing platforms you can personalize communications with messaging that deals that reflect specific interests.

4. Test new channels and diversify

With UA, diversification is key — more publishers means more opportunities for strategic optimization. Plus, you’ll be protected in the event of algorithm changes, such as those pushed by Facebook in 2018. If you limit yourself to one or two ad networks, it will be impossible to scale campaigns while optimizing for quality.

Remember: Performance marketing is about targeting the right audience instead of reaching the most people. App marketers should seek solutions that allow them to attract high-LTV users. That means first identifying the demographics and behavioral patterns of those users. Once you know who you want to reach, find channels that give you access to those types of users at the best price point. The best place to start is with a test — then you can let performance data guide your decisions.

So what is performance marketing? It’s the most valuable approach in an app marketer’s toolkit. It requires a great deal of strategy and preparation, but the benefits are invaluable. At MOLOCO, we specialize in helping apps grow, using a combination of machine learning and performance expertise. We can help you tap into the full power of your data, plug into the programmatic ecosystem, and run highly-optimized campaigns. To explore our solutions, get in touch today.