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W3i Releases Report Showing Just How Much More Expensive User Acquisition is Getting

W3i has released a report that quantifies how costly it is getting for developers to acquire new users. Specifically, from January to June in 2012, CPI (cost per install) has increased on average from 59 cents to 92 cents, an increase of 56%. Android is seeing costly increases as well, having increased in the same timeframe from 30 to 51 cents, a 70% increase.  

W3i places the onus for these increases on the big-name companies entering western markets, such as GREE and DeNA. With their desire to achieve the kind of success that they have had in the Japanese market, they’ve been pouring massive amounts of money into marketing to try and drive users to their apps, which has helped to drive up the price of advertising and other marketing tools.

As W3i points out, the challenge for smaller developers is that industry behemoths with deep pockets are essentially on a level playing field with them. While this means that small developers can have massive successes, the increasing difficulty in attracting new users makes having even modest successes that much more difficult, and much more expensive.

Alternative methods of app discovery are still relatively untested. Facebook’s App Center has yet to establish itself, being still new to the market. iOS 6′s feature to “Like’ apps on Facebook directly from the App Store could help with discovery, but that’s still months away.

These high costs may explain why PapayaMobile and 6waves are launching app traffic exchange programs to try and get games to acquire users without taking up valuable ad inventory on other services, thus driving the CPI down to more reasonable levels. A rising tide sinks all boats, and extremely high user acquisition costs could keep games from being a worthwhile investment for all but the biggest players, flops could prove to be extremely devastating, and the independent developers who helped to form the foundation of the mobile gaming market could be all but shut out entirely if costs aren’t brought down to more reasonable levels.

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Carter Dotson
Connect with Carter Dotson // email // twitter

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