Sergei Kovalenko, co-founder of Braavo Capital, a leader in revenue-based funding for mobile apps and games, discusses the evolution of app user acquisition advertising with AdSide Media CEO Evgeny Marchenkov.
According to market research companies like Statista, the number of global smartphone users now exceeds 3.5bn. With those numbers having risen consistently over the last decade, it's no surprise that mobile ad impressions became the foremost target for marketing agencies in search of new audiences. It’s amazing to think that the Apple App Store only launched 10 years ago, and yet mobile advertising accounted for over $129bn in total spending last year. This transition to digital advertising is correlated to a noticeable shift away from print, radio, and TV – where advertisers pay hefty fees for ad space prior to ever seeing a return on investment, sometimes spending millions on fruitless campaigns. Hence, the prevalence of digital advertising has ushered in a new age: the era of performance marketing. Here, instead of paying for unproven ad space, advertisers now pay for successful transactions like sales and downloads, allowing companies to easily measure their ROI. Perhaps nowhere is the effect of this shift more apparent than in mobile gaming, where user acquisition is central to any game developer's marketing strategy.
Abbreviated as ‘UA’, user acquisition consists of data-driven ad campaigns that drive app downloads and purchases within mobile games, with a heavy focus on targeting social media platforms like Facebook and Instagram. A company that has found recent success in this space is AdSide Media, a marketing agency that provides creative and UA services to app developers. I recently spoke with their CEO, Evgeny Marchenkov, about the landscape of digital ads, and he shared a number of insights about his experiences, starting with how current marketing trends have evolved:
“I noticed the rise of performance marketing for mobile in 2015 when online metrics finally became good enough to measure the efficiency of our ad campaigns. That’s when cohort analysis became a thing, allowing us to analyze user behaviour to predict a customer’s lifetime value for an app - that was a game-changer. Prior to that, Adside Media mainly offered media buying services, but once the ad technology changed, we switched to running UA campaigns, which turned out to be a better direction for us.”
According to Evgeny, the world of UA has only gotten more competitive each year. Every new mobile game has to compete with hundreds of existing alternatives across the app stores, to say nothing of fickle user preferences that could spell doom for any given app. As a result, UA techniques that were effective three months ago could be obsolete today, and marketing teams have to generate new ads on a regular basis to avoid failed campaigns. This is where smaller marketing companies were once at a disadvantage – due to limited budgets and a lack of production assets, it was challenging for them to maintain a constant flow of ad content, aka ‘creative’, to compete with bigger rivals. They were also handicapped by the expensive ad tech tools that larger competitors used to optimize their reach. But all of this was disrupted when social media companies released their own self-service ad platforms that anyone with decent advertising know-how could operate. Machine-learning algorithms started appearing in recent years that took over basic functions like managing bids and buying media. I asked Evgeny to elaborate on this development:
“Game developers used to pay media buyers to select the countries, gender, and age of their target advertising audiences. But once automation came along, that process became a black box. Google launched Universal App Campaigns in 2018, and Facebook released their Automated App Ads in September of this year, making media buyers obsolete. As a result, today's developers only have to pay for creative, and platforms like Facebook will handle the rest by optimizing their campaigns towards securing app downloads. They'll even penalize your reach if you insist on managing your campaign manually, which means the AI invariably outperforms anything we've done in the past.”
With this automation in place, many of the benefits of using third-party ad tech have largely disappeared. Forced to seek out a new edge for their marketing efforts, UA managers found the answer in their creative production teams, since the development of assets like pictures, animation and audio are things AI still can't do very well. For Evgeny and his team, this shift of power necessitated an adjustment to their business practices:
“User acquisition suddenly became easier for everyone due to AI automation, so AdSide decided to concentrate more on creative production services over UA. It's actually become the main part of our business since clients know the ad platform will handle the campaign itself. The marketing industry's focus has shifted to securing the best artists, motion designers and animators. Among those, 3D artists are the most in-demand, since it's hard to find people who can use graphics engines like Unity and Unreal. But the major game studios are pursuing those same artists for AAA projects, so we have to compete with them in order to secure the best staff.”
That said, simply hiring additional creative talent isn’t a solution in itself. As anyone with marketing experience knows, most ads have an unimpressive shelf life, and their performance quickly declines after people have seen them enough times. Only about five per cent of ads do well enough to justify additional budget spends, and even an exceptionally successful one will decline in performance after a few days. This drop-off in productivity is known as ‘creative fatigue’, meaning only a handful of ads will ultimately become the breakout success that advertisers shoot for. Only by churning out lots of ads while testing them each step of the way can a UA team hope to find the elusive ‘super-creative’ that Evgeny told me about:
“The average lifetime of an online ad is two weeks, but the most successful ones can run up to six months, and that's the kind of super-creative everyone wants. The way to find it is by creating different iterations of your best-performing ads until you narrow it down to the best ones. For example, AdSide conducted an experiment in August where we provided our client with 35 unique creatives, along with 133 variations. We then spent $10,000 on testing them to find the best ones, and two of the five best-performing ads became long-term winners. Hundreds of thousands of dollars later, we're still running those two ads today, and they both have a positive ROAS.”
My takeaway from speaking with Evgeny was that as AI continues to monopolize ad technology, the only real control advertisers will have is in how they develop their creative. Considering that, the money spent on social media ads is predicted to hit $52bn in the US alone by 2024, it’s clear that creative development of display and short-form video ads will continue to dominate across the likes of Facebook, YouTube, TikTok, and Instagram. Needless to say, this is likely where many agencies like AdSide will be focusing their resources and efforts in the coming months and years:
“To be honest, AdSide's operations are only limited by the size of our production team. Given our current capacity, our services are actually sold out until the end of the year, and we're constantly hiring new designers and 3D modellers to keep up with the workload. We expect the demand for creatives to continue growing in the next two years, so if I could give any advice to new mobile game developers, it would be to prioritize creative production. There are three options for that: you can build an in-house production team, hire freelancers or outsource the work to a creative agency. The first option is the hardest, since it's difficult to find competent designers. If you publish a job ad for a 2D artist or motion designer, you're likely to receive over 500 applications, but only two or three of them are actually capable of delivering. That's why you need an Art Director who can source the right candidates for you. Additionally, salaries can get very expensive, with 3D designers being more expensive than 2D ones. And if you cut costs on creative talent, inevitably you have to lower your expectations of the final result. Or you can just use agencies like AdSide Media, who are gurus with UA field experience after having worked in it for several years.”