Beware of the App Store Gold Rush

The iPhone app store has been a wild gold rush of sorts over the last three years. Many publishers have found significant revenue by landing their app in the top 10 of respective categories. With that, most application promotion is focused on driving the application’s rank up within the store. That’s led to some shortcuts publishers will live to regret.

One of those is the top 10 strategy, which isn’t really much of a strategy. This is typically executed via incentivized installs. Users get free virtual currency in their favorite games in exchange for downloading other applications. This is a bit of a shell game. These downloads rarely convert to actual revenue because the users are just interested in the currency, not the app. The real strategy is to game the app into the top 10 organic downloads, where it will get more traction from users who might actually be valuable. This acts as a traditional loss-leader for organic downloads that generate much higher revenue.

The good times won’t last with this rather crude approach. Appl’s App Store now has over 300,000 apps. Platforms like Android introduce a much broader path to app discovery and signs point to the mobile web increasing in popularity over apps. That’s going to make the Top 10 or bust strategy less effective. Don’t get me wrong, it’s still a viable answer for many publishers. Take ad-supported games for instance.  When the everyday iPhone user is in the mood for a new game, the obvious place to go is to the App store to see what games are the most popular. If you are in the mood for a new game, you are willing to take whatever is free and give it a shot. This makes total sense.

But what works for games doesn’t always translate for other categories. Rarely will a consumer think to themselves “I really would love a new finance/lifestyle/social media app.”  They are more likely thinking “I really would love a new mortgage calculator/celeb gossip/Twitter app”.  In those cases, the “top ten” strategy is overkill.

The better method is what I call RVC: Rank versus Competition. Chances are, the person looking for a mortgage calculator will either do a search, or go into the finance section, but quickly sift through the list until they find a mortgage calculator. The user is not looking for the top finance app; they’re looking for the top mortgage calculator app.

The RVC strategy is based on a simple theory: If your app is ranked  No. 20, but all your actual competitors are No. 21 or lower, you’ll garner more organic downloads, and steal share from the competition. You can still spend the money necessary to get to the top 10, but the difference in organic growth rarely makes up for budget spent to sustain a top 10 standing.

As a point of reference, take a step out of the app store and mobile world all together.  If you’re a cupcake bakery, there’s no need to outspend a 5-star restaurant or McDonalds in advertising.  Just because each is a place to get food, doesn’t mean you have the same customer. If your application is a mortgage calculator, why spend the money to compete with Bank of America, Chase Mobile and PayPal?

My favorite part of this strategy is … it’s an actually strategy. Monitoring RVC forces marketers to be better marketers.  It forces marketers to understand their audience, know who their app is actually competing with, keep track of those competitor’s strategies, and ultimately measure and monitor actual ROI against your marketing budgets and build sustainable plans.

As previously mentioned, RVC measurement is not ideal for everyone.  So please, test and understand various ways to monetize your product. See how your ROI fluctuates based on your rank in comparison to a clearly defined set of competitors. If being in the top 10 is your most efficient bet, roll with it. Worst case scenario is you learn more about the category your app lives in and it helps you build stronger strategies as the mobile landscape continues to change.