You have probably already caught up with Aaron Maxwell’s post on Mashable yesterday asking the question Is developing a Mobile App worth it?
His rough calculations suggest the ROI is 2839 people per dollar invested (UPDI) spent on a mobile web site, 527 UPDI for an iPhone apps and 599 UPDI for a universal mobile app. Which suggests that the mobile web offers a better ROI over apps.
Anyway I thought I would give his calculations the Pepsi Refresh treatment and see how investing Mobile Apps and the Mobile Web would stack up for advertisers against playing the biggest game in town… putting an ad on the Super Bowl.
As we observed earlier this month an estimated 111 million people watched the Super Bowl between the Packers and the Steelers this year. The average cost of a 30 second spot on the Super Bowl is $3 Million.
This means a Super Bowl TVC delivers an ROI of just 37 UPDI. And that’s before you ad the costs of making the TVC.
This makes it easily the least effective option based on Maxwell’s scale. But is it?
The problem of course is Maxwell’s calculations are based on the maximum potential reach and not the average estimated or probably reach of the platform.
This then comes back to the difficult question of estimating just how many copies of a popular Mobile Phone App are typically downloaded. Back in August last year the Next Web noted that the most popular iPhone game ever (Angry Birds) had achieved 6.5 Million paid downloads and 11 Million ‘Lite’ downloads. Plus as you can see by this announcement today to Partner with Groupon ShopSavvy has achieved a similar number of downloads for its bar code scanning software. So achieving 10+ Million Mobile App downloads is achievable. It will take time. Maybe even years but it is achievable.
So let’s assume you can match the success of Angry Birds or a ShopSavvy. How does your $30,000 iPhone App stack up against the Super Bowl now? Actual still pretty well. If you could mirror the run away success of Angry Birds then you’ll achieve 10x the UPDI of the Super Bowl. Indeed you would only have to move just over 1 Million downloads of your Branded App to match your Super Bowl investment.
The same goes of course for your mobile web site. 1 Million unique visitors over the lifespan of the campaign is all you would need to break even with the Super Bowl.
Of course there are a lot of “ifs and buts” associated with this equation. Simply because it is a lot easier to hit a guaranteed 100+ million plus viewers watching the Super Bowl than it is to reach 1+ Million Downloads in the App Store or 1 Million Uniques with a website.
You may recall the average rate of return for iPhone developers for an App was calculated last year by Tomi Ahonen to be just $682. Times that figure by $0.70 and you’ll discover the average number of downloads for a paid app is less than 1000 units. So it comes as no surprise to discover that success in the app store requires further investment in advertising and marketing to promote your ‘free’ App.
As we have seen previously the cost of promoting an app into number 1 spot can cost upwards of $250,000. Add this figure to the cost of developing the App and the potential UPDI falls back to around 56 so now you would have to push out over 7.5 Million apps to break even with the Super Bowl.
If you don’t factor in the cost of promotion then chances are you’ll end up with your Mobile App Marketing campaign sitting it out on the long tail of the App Store. So if you only manage 1000 downloads then your “cheap” mobile marketing campaign would end up with a UPDI of 0.033 (i.e. a complete waste of time and effort).
The message from all this is Apps, like web sites (mobile or otherwise), are relatively inexpensive to create and distribute compared to the putting ads on the TV. The problem comes when you try to match the guaranteed reach of TV then Apps and Web sites continue to be a lottery. Some work (and when they do they receive a lot of press coverage). Most fail miserably.
In the end it is the long tail economics of the Apps store that wins out. Having said that, if you are in the market experimenting, Mobile Apps are a fun and relatively inexpensive low risk approach. Just don’t get too excited when you launch the App. The time to get excited is when your App starts to move rapidly up the charts into number 1 spot.
Posted on February 26, 2011
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