State of the App: 2014 Review & 2015 Predictions

Introduction

2014 Highlights

Highlight 1: Paid User Acquisition Started to Pay Off

Highlight 2: App Engagement Hits New Highs

Highlight 3: Watershed Year for App Retention

5 Trends We Expect to See for 2015

Trend 1: Appification

Trend 2: Cross Channel Makes for Smarter Marketing

Trend 3: The Rise of Personalized App Marketing

Trend 4: Remarketing Outside of the App

Trend 5: Predictive App Marketing

Conclusion

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Table of Contents

There’s no doubt we’re living in an appified world. What does that mean? Apps are not just on our phones- they’re on our watches, in our cars and the best websites are actually apps. Apps are the primary way people expect to access information and interact with brands. As apps become a way of life, brands must evolve and mature their mobile marketing strategies and apply new tactics and techniques.

App marketing has indeed evolved in recent years. In 2013, marketers focused on user acquisition. In 2014, with people spending almost 90% of their time spent on media through apps, the focus was on engagement - and how to use data to improve user interaction. These efforts have paid off; people spent 21 percent more time in apps and app retention is at an all-time high.

As 2014 draws to a close, the focus of app marketers is shifting towards how to leverage appification and powerful analytics for even smarter marketing. Savvy app marketers are seeking to deepen user engagement and personalize the app experience, which is paving the way for 2015’s hottest trends:

• Appification• Cross-Channel Makes for Smarter Marketing• The Rise of Personalized App Marketing • Remarketing Outside of the App • Predictive App Marketing

This report, assembled from speaking to thousands of companies, interviewing industry experts and digging into our data, will:

• Highlight the key trends we’ve seen in 2014• Prepare you for what to expect in 2015• Give you a head start with actionable app marketing

advice

Welcome to 2015 and the brave new world of apps!

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Welcome to an Appified World

Building meaningful relationships with your users requires a fundamental understanding of how they interact with your app. We examined thousands of different apps across millions of devices to glean the highlights of 2014, and garner insights for the coming year.

2014

HIG

HLIG

HTS

Highlight 1: Paid User Acquisition Started to Pay Off

Ad Acquired Users Now Perform Just as Well as Organic UsersUntil 2014, traditional wisdom has been that organic users are king, and ad-acquired users are a necessary complement to get to scale, but with the implicit understanding that they simply don’t perform as well.

2014 has turned that notion around. Localytics research shows that ad acquired and organically acquired users perform equally well once inside the app, as measured by the percentage of power users (users who open an app 10 or more times) and three month retention (users still using an app three months later). By comparing both of these critical metrics in app engagement, it demonstrates that both methods of acquiring users is equally valuable.

In fact, users who discovered the app via an ad network are more likely to come back for a couple more sessions than organic users. This more frequent early life cycle usage is likely due to the quality of the ad – if an ad can convince the user of the benefit of the app, they are more likely to give it a couple chances.

This is a testament to app owners being more intelligent with their ad spend. By better understanding their return on ad spend by ad source and campaign, app owners are more likely to yield a better crop of engaged and revenue-generating paid users.

This is good news all around for app marketers; 2014 ushered in a new era where there no longer has to be a trade-off between more user volume over user quality. Both strategies can be used in parallel to achieve acquisition targets.

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Highlight 2: App Engagement Hits New Highs

21%More time in app

22%More app launches

%34More time in app on

large devices

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2014 has been a dynamite year for user engagement with apps: we’ve seen people launching apps more frequently and spending more time in them. The app ecosystem is also burgeoning with over 1.2 million apps in the App Store alone and 41 apps installed on the average smartphone1. Manufacturers have also responded to these trends with a bigger class of smartphone, the phablet, which became mainstream with the introduction of the iPhone 6 Plus.

People Launched Apps 22% More Times in 2014On average, people were launching their apps 11.5 times a

month in 20142, compared to 9.4 times per month in 2013 – an increase of nearly one quarter!

People Spent 21% More Time in Apps in 2014In 2014, people spent 21 percent more time in apps2 than they

did the previous year. Spending more time in apps is a clear signal that time is shifting away from the desktop and mobile web and towards apps. People spending more time in apps has other benefits for brands. Research3 shows that users who have a longer first app sessions are more likely to return to return to an app quickly (within 1-12 hours) and therefore avoid the ‘app churn risk window’.

People Spent 34% More Time in Apps on Large DevicesIn 2014, people with large screen phones (greater than 5 inches)

spent 34 percent more time in apps than on smaller screen phones4. The modern smartphone is now a mini, portable computer complete with a larger screen. As apps become even more prevalent – across mobile and the web - it becomes increasingly important to have a phone that can suit user’s engagement needs.

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1 An Era of Growth: The Cross-Platform Report Q4 2013, Nielsen, 2014 2 State of the Appnation – A Year of Change and Growth in the U.S. Smartphones, Nielsen, 20123 Time in App Increases by 21% Across All Apps, Localytics, 2014 4 The App Churn Risk Window: 60% Chance Users Who Don’t Come Back Within Seven Days Never Return, Localytics, 20145 Large Screen Devices Show 34% More Time in App, Localytics, 2014

Increased engagement is also driving the future of smartphone design with phablets poised to eventually replace tablets and regular smartphones6. With apps as a major driver of smartphone interaction, screen size becomes an essential factor in manufacturing design. In 2014, Apple dramatically increased its iPhone screen size by 37.5% with the release of the iPhone 6 Plus.

“...phablets poised to eventually replace

tablets and regular smartphones”

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6 Why Phablets Will Eventually Replace Tablets and Regular Smartphones, VentureBeat, 2014

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App downloads is a popular metric to gauge the success of an app. While useful, it doesn’t tell the full story. In 2014, 20 percent of apps were only used once7, which is actually a 2 percentage point improvement from the previous year. It indicates, however, that keeping users engaged and coming back to their app also needs to be a high priority metric for app marketers.

The good news is that app retention has been steadily increasing over the past four years. In 2014, app retention reached an all-time high: 39 percent of people who downloaded an app used it 11 or more times. This improvement in app retention indicates that app marketers are creating app experiences that better meet user expectations and encourage return visits.

App Retention at an All-Time High Retention

Abandonment7 App Retention Improves – Apps Used Only Once Declines to 20%, Localytics, 2014

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Highlight 3: Watershed Year for App Retention

Push Messaging Improves RetentionPart of what makes apps delightful is by creating well-timed, personalized communications through push and in-app messages. In fact, in 2014, people who enabled push notifications had 2-3x higher retention than those who didn’t enable push in their app8.

Overall, apps are getting better at understanding and meeting users’ needs. Great apps build trust with their users by sending targeted, relevant messages. This results not only in people being more engaged with their apps, but also coming back again and again.

Apps used only once declined to 20%

2–3x

higher retention for push enabled users

8 Push Messaging Drives 88% More App Launches, Localytics, 2014

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2015TOP TRENDS TO WATCH

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2015 will usher in a new phase of smarter app marketing, where emerging trends like predictive app marketing, remarketing and personalization will lead the way in shaping how marketers engage, entertain and retain users. Brands must mature their marketing practices even further by leveraging app insights across all marketing channels and, ultimately, reach a state of nirvana when they can predict what their customers are likely to do next - And most importantly, how best to engage with them.

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“Over the past year, websites have begun to

become more app-like in their functionality”

“Appification”9, simply defined as apps crossing over from mobile to other devices and form factors such as the web, watches and even cars, will firmly take hold in 2015. Over the past year, websites have begun to become more app-like in their functionality. Many app characteristics, such as two-way communication, responsive design, and automatic updating, will be increasingly integrated into websites to emulate the user experience that people have come to expect.

The trend towards Appification is of course being driven by people spending much of their time on mobile devices. Static web pages do not translate well to small screens, so traditional websites will be forced to live up to the interactive and UX standards of mobile apps.

Facebook, Google Maps, and Yelp are all examples of websites that have embraced this trend towards the interactivity and personalization typically found in apps. These web apps display app-like characteristics such as remembering recent locations and a personalized news feed. These websites demonstrate the fundamental shift that’s underway in terms of how information is displayed on the web.

As time in apps increase on mobile devices, the disparity between mobile and the web as different ways to display information will more or less disappear in 2015.

9 Wired Magazine 25 Years After Its Birth, the World Wide Web Becomes Appified, 2014

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Trend 1: Appification

Trend 2: Cross-Channel Makes for Smarter Marketing

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10 Smartphone Users Worldwide Will Total 1.75 Billion in 2014, eMarketer, 201411 ESPN SportsCenter app rebranding boosts mobile consumers’ power to choose content, Mobile Marketer Daily, 2014

In 2014, mobile apps overtook traditional desktop web in internet usage. With smartphone penetration predicted to hit 70 percent worldwide by 201710 and overall time in apps increasing, in 2015 the app will be fully recognized as an important channel. Companies will start to actively seek ways to track and engage with users across multiple channels, that include the nuances of apps and app users, in addition to more traditional web and email channels.

In 2015, creating a holistic view of customers across multiple channels will differentiate mobile leaders from mobile laggards. ESPN, for example, creates user profiles to map multi-channel user behaviors11 to personalize their app user experience, get insights on how they can better engage with customers, and to make their ads more targeted.

As people start to exist across even more channels, including apps, it’s important for companies to be able to target them regardless of their touch point. In order to be effective, app marketers must be able to export user data across multiple channels, and choose best-in-bread solutions to address their varying needs across apps, the web and email.

“In 2015, creating a holistic view of customers across multiple channels will differentiate mobile leaders frommobile laggards.”

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Trend 3: The Rise of Personalized App Marketing

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Consider this: targeted push messages can double app open rates, triple app conversion rates and increase app retention by 2-3x12 compared to generic, blasted push messages. Consumers respond more positively to messaging that is personalized based on their behavior and interests, compared to messages that are spammy and unauthentic.

Personalization, defined as the ability to create highly targeted marketing to users, to customize their app experiences will become a top trend in 2015.

Apps collect a variety of data from users. Demographics, location, and behavioral data are golden opportunities for marketers to personalize a user’s experience within their app. With the tools now in place to effectively do this, app marketers will be able to create profiles of their users and target them based on their behavior - both in-app and outside the app - and their profile characteristics.

Personalization has been proven effective. A+E Networks was able to create and send customized push notifications based on users’ individual content preferences and in-app behavior. With this strategy, A+E Networks achieved a 200-percent increase in user engagement with push notifications13.

12 The Power of Push, Localytics, 201413 A&E Networks Case Study, Localytics, 2014

“Nobody likes to be spammed or receive generic and irrelevant content. Understanding and catering for the needs and behaviors of real people will start making an impact on mobile conversion and loyalty. With the tools and data now in one place, personalizing their app marketing will become a priority for smart marketers in 2015.”

- Raj Aggarwal, CEO Localytics

Personalization requires the smart application of analytics data with marketing. With a wealth of data collected about the consumer, 2015 will see the departure of blasted app campaigns and the rise of personalized marketing.

“Consumers respond much better to messaging that is catered and personalized

towards their behavior and interests... ”

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Trend 4: Remarketing Outside of the App

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With 2014 showing that mobile ad-acquired users perform just as well as organic users, in 2015 marketers are going to want to maximize their return on ad spend even further.

Mobile ad remarketing will gain momentum in 2015. Mobile remarketing will give app marketers the opportunity to bring back indecisive or churned customers with highly targeted ads outside of an app, based on their in-app behavior and profiles. Users who came close to a desired action but were unable to complete will get gentle reminders outside of the app to nudge them in the right direction. Personalized ads already exist on the web, and now this ability to retarget with mobile ads will become an important part of an app marketer’s toolkit.

In 2014, in-app and push messaging entrenched their place in the mobile landscape as tools to encourage users towards certain actions such as re-engaging them outside of the app. 2015 will see the next step in engaging with the user—the ability to re-engage app users with personalized ads while outside of the app.

“this ability to retarget with mobile ads will become an important part of an app marketer’s toolkit.”

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Trend 5: Predictive App Marketing

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Smart marketing demands powerful analytics. Marketers are collecting mountains of data, but turning this data into actionable insights is what impacts the bottom line for digital businesses. Today, measuring how users are being acquired, engaged, and retained within your app is a necessity. The next step - predicting what users are likely to do so you can act on it - will start to become a reality in 2015.

For companies that have invested in strong mobile analytics, the foundation is already there. 2015 will see the creation of solutions that leverage powerful analytics to create segments of users such as likely-to-churn, about-to-purchase, going-to-be-a-high-value-user and other segments that are useful to an app. Once these solutions are in place, strong marketing automation will allow for re-targeting users who are, for example, likely to churn or encouraging users who appear likely to buy.

“The promise of Big Data continues to become real as organizations race to hire data scientists who can turn their mountains of data into actionable insights that can significantly impact their business. They will increasingly seek out partners that share their desire for actionable data and who can help their apps deliver the experiences their customers want before they even know they want it.”

-Henry Cipolla, CTO Localytics

The possibilities for predictive app marketing are endless. Not only can marketers message users who seem likely to churn, but they can also understand what factors impact a user before they churn. Understanding what your users will do before they do it used to be a marketing holy grail – but with predictive app marketing, it will become a reality.

“Understanding what your users will do before they do it is a key trend that will become apparent in 2015 and beyond.”

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Conclusion

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2014 proved that truly effective app marketing is fueled by great customer engagement. 2015 brings a new set of opportunities for marketers who want to stay ahead of the curve using powerful analytics.

Appification will firmly take hold of the web in 2015, leading towards a more cross-channel app user experience. With appification, it becomes increasingly important for app marketers to leverage open and extensible platforms across mobile, the web and email to develop a cross-channel plan to reach users in a highly personalized way with targeted information. Doing so will enable a meaningful dialogue between consumers and marketers.

While retention is increasing, even if consumers leave an app, app remarketing will allow for personalized ads to re-engage those users and bring them back into the app. All of these tools pave the way for predictive app marketing – the ability to know what your customers are going to do before they even do it. Whether a user is about to complete an in-app purchase or thinking to uninstall your app, predictive app marketing will help guide the user to make the choices that you would like them to make.

Strong mobile marketing automation is the glue that holds all of these trends together. Understanding your users deeply will enable the smart and dynamic decisioning, such as automated segments, required for truly effective mobile marketing automation.

2015 is already looking like it’s going to be another year of mobile apps getting deeper, better and faster. Keeping up will mean using smarter marketing.

What are you going to do to be ahead of the curve?

“Strong mobile marketing automation is the glue that holds all of these trends together.”

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At Localytics we know that smart marketing demands powerful analytics. This is why we focus on bringing insight and action together in one powerful app marketing and analytics platform.

It’s a win-win for brands and end-users alike. App publishers create better app experiences, leading to passionate users that ultimately drive engagement, loyalty and revenue.

We live and breathe app marketing and use our knowledge to generate insights from over 28,000 apps across 1.5 billion devices. Many of the world’s best- known brands including eBay, ESPN, SoundCloud, and The New York Times have benefited from using our solutions to create insight into their app users and leverage that knowledge to create more personalized user engagement.

We’re always excited to talk about mobile trends and marketing. If you want to learn more about the top trends of 2015, or just want to learn more about Localytics in general, reach us at: info@localytics.com or visit www.localytics.comPhoto Credit: Michele Ursino, “Texting in NYC”, cover pagehttps://www.flickr.com/photos/micurs/8011990976Startup Stock Photos, pg. 1 & 11https://www.flickr.com/photos/120262924@N05/13454353725/, https://www.flickr.com/photos/120262924@N05/13454718934/momentcaptured1, “A Girl and Her Social Network”, pg. 2https://www.flickr.com/photos/pat_ossa/6051457263/in/set-72157622498991525Garry Knight, “Texting in the Rain” & “Long Shorts” , pg. 4 & 5https://www.flickr.com/photos/garryknight/8331105136/,https://www.flickr.com/photos/garryknight/5546912391/Andrew Sutherland, “Oblivious”, pg. 7–8https://www.flickr.com/photos/fishyone1/14673616141/FaceMePLS, “Tattoo Tatau New Zealand”, pg. 10https://www.flickr.com/photos/faceme/14863828464/Pete, “Text On The Beach”, pg. 12https://www.flickr.com/photos/comedynose/4739614082/-BenThompson, “Untitled”, pg. 13https://www.flickr.com/photos/comedynose/4739614082/AFS-USA Intercultural Programs, “IMG_1505.jpg”, pg. 14https://www.flickr.com/photos/comedynose/4739614082/Jim Fischer, “Dad Texting in the Vineyard”, pg. 15–16https://www.flickr.com/photos/comedynose/4739614082/

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