Advertisers are in the midst of conference season. As the SVP of Strategic Partnerships at Human Demand, I’ve attended quite a few – ranging from IAB to DLD, and MMA is fast approaching. I’ve seen a theme develop in recent weeks, reiterated by speakers with differing backgrounds across different events, focused on mobile user acquisition and monetization as the necessary focus of professionals in 2014.
I believe Simon Khalaf, CEO of Flurry, captured the state of mobile best during his keynote at Source14 in San Francisco. Given the current adoption of mobile within individual verticals, Simon shared untapped opportunity by quantifying the present state of mobile adoption contrasted by the total market value: i) 14% market share of the gaming industry (a total opportunity of $155B), ii) 0.66% share of the total payments market ($157B opportunity), and iii) a mere 1% of the total US retail market ($3.25T opportunity).
However, while the underlying themes presented at these events have been supported by strong industry trends and research by reputable firms, I’ve concluded that the true driver of mobile success on 2014 and beyond is user engagement and retention.
Successful mobile adoption has only truly occurred in one vertical: social. It’s reported that popular social networking applications – Facebook, Twitter, Instagram, etc. – see nearly 70% of the average user’s activity occurring on mobile. Thus, mobile user engagement and retention is the key indicator of success. On average, as reported by Apptentive and shared on The Moz Blog, a mobile application retains a mere 4% of users 12 months after initial download. More applicable to the argument of this post, the average app sees 76% of new users in the first 3 months disengage after the initial download.
Initial user engagement relies on manufacturing a habit-forming application by guiding users through a series of experiences called hooks. As described in Nir Eyal & Ryan Hoover’s recent book, “Hooked; How to Build Habit-Forming Products,” a habit is formed the more often a user is run through these actions – minimizing the time between the repetitive steps. The Hook Model consists of four parts: Trigger, Action, Variable Award, and Investment. A Trigger can be an external or internal actuator of the desired behavior. An Action is the behavior done in anticipation of the reward. A Variable Reward is the reason the Hook Model works – instead of a straightforward feedback loop the variable reward creates intrigue of an unexpected response upon completing the same Action over and over again. “The Investment occurs when the user puts something into the product or service such as time, data, effort, social capital, or money,” – i.e. I am invested in Facebook as my memories, contacts, photographs, etc. live on the service and improve my experience for the next time I visit the website.
I recently contributed to a paper for the Application Developers Alliance titled “Motivate and Engage Users; Solutions for Boosting Customer Retention” (link forthcoming). In it, various working group members share their thoughts on building an engaging mobile application, which engagement metrics to monitor, differences between various mobile platforms, the opportunities to leverage game dynamics, push notifications, social media, etc., and user retention processes.
While user retention is greatly affected by creating an engaging application, it is my opinion that paid re-engagement is the strongest method to ensure user adoption and habit-forming behavior is fostered. Once a user has invested in an application – by downloading, installing, and launching the app – the developer is presented with the unique opportunity to streamline the process of adoption and repeated use. In most cases, initial user acquisition is a result of a paid media investment. It is irresponsible to spend heavily for one-time users. It would be wise to invest less on initial user acquisition, and instead disperse paid media funds for both user acquisition and user retention (retargeting) – to minimize time between app-opens and ensure habit-forming behavior via push-ads.
As Hany Nada, Managing Partner at GGV Capital, shared at Source14, “I don’t care about traction. You can buy traction. I care about engagement.”