Return On Ad Spend — How to Accelerate and Extend

Illustration by Justyna Mieleszko

Return On Advertising Spent is one of the most interesting metrics from the business & product point of view. Everyone measures it. From startups tracking the growth, to sustainable businesses doubling their revenue. All businesses and products.

The goal of measuring ROAS is to determine if the cost of advertising yields an acceptable amount of incoming revenue. It helps you continuously refine your spend to eventually generate the most revenue for the least costs. Whether you hustle for the next funding round or you scale your profitable business, it is necessary to keep an eye on it, and constantly improve. Both investors and business owners love it when it’s on the plus side.

How can you do it? Let me share a few thoughts based on a subscription based mobile app that I run.

I am going to talk about an app in subscription based model with in-app purchases (streaming services, subscriptions). As you can see below, in-app purchases are considered as one of the most effective means of mobile monetisation.

Most effective means of mobile monetization — ADCOLONY

Let’s check which metrics can lead to maximising ROAS for this kind of an app. When you dive into data, you can easily detect elements that need to be improved.

Below you can see the estimated ROAS model that tracks the performance of campaigns when we improve two metrics — average Cost Per Install and Trials Per Installs ratio. Starting estimated ROAS is 115%.

Estimated ROAS model

Analyse data and decide which metric needs a boost.

When I look at ROAS, I can see a few the most significant metrics that need to be fixed. It covers the product, as well as, the business side. I’ve picked three and I focus on them, constantly A/B testing & learning.

1. Cost Per Install — CPI
2. Trials Per Install —TPI (there’s a 7-day free trial & freemium model)
3. Lifetime value — LTV

As you can see in the table above, even small 1% change within trials per installs ratio or 5% decrease in cost per install can lead to better ROAS results. It means that it’s definitely worth focusing on these aspects. What shall we do then?

Pick one or more metrics and try to improve them.

Getting the highest return on money you spend acquiring users

Start with trying to lower your Cost Per Install. The possibilities are limitless. For example, you can:

1. Run video/animation ads instead of the static ones;
2. Simply make this add more interesting (intriguing, engaging);
3. Target smaller markets OR very specific geographic areas;
4. Use custom audiences and lookalike audiences;
5. Test different headlines, descriptions and call to actions;
6. Change the distribution channel (I highlighted it in my article about pivoting).

At the very beginning, we have been running only static ads that resulted with very high CPI.

Focusly static add example

We have started experimenting with animation ads very quickly. Results just blowed our minds. We lowered CPI by almost 60%.

Focusly ad example

All you have to do is test & learn.

Grow the user base

If you want to grow your user base and have more Premium users you have to empathise with them. Answer their questions. Engage them and start a conversation. Optimising the onboarding process including the welcome screen may be a good idea. The more trials you have, the more chances for full-premium users.

Below you can see how we have improved our onboarding process by focusing on all information that user might be interested in.

OLD onboarding process

NEW onboarding process

As you can see, it was not about turning everything upside down. Small changes can lead to better results.

Increase your customer lifetime value

Your mobile app users have value well beyond the initial download of your app and what they spend on in-app purchases. I believe that LTV is the most important metric in SaaS businesses. The reason is, if you don’t know how much your customers are worth, you’ll never know how much to spend to acquire or retain them. It also makes way more sense to evaluate your product’s success based on long-term results of marketing activities than the short-term high of a single sale.

Focusly’s push notification shared by a user

How to keep users longer? You can always test e.g.

1. Creating multiple engagement points (I elaborated on this in my latest article about implementing behavioral economics rules in UX);
2. Sending push notifications;
3. Delivering new, valuable content regularly;
4. Retargeting and reengaging.
5. Carefully track CHURN as well. It’s important regarding users’ lifetime value. Don’t loose your customers.

Conclusion

Either you are a startup tracking its growth, or you run a sustainable businesses that doubles its revenue, you should focus on improving what is important. Start small and watch the results close. Don’t be afraid of experimenting. Satisfying ROAS is at hand.

Need help with growing your business? Looking for interesting ventures? Want to know us better? Let’s talk!