Eric Seufert’s Post

Brand Equity on Mobile Brand recognition isn’t the same as brand equity; brand recognition can decrease a firm’s marketing costs, but it can’t eliminate them completely on mobile, and it also doesn’t directly influence revenues (as a result of consumer response) as it does with retail goods. Because of the nonexistent switching costs between apps, the lack of information gaps (users can immediately understand the quality of an app for free) and the resultant lack of brand loyalty, and the opacity of mobile as an ecosystem, brand recognition may award a developer a marketing advantage, but it doesn’t necessarily produce brand equity.

It’s time to retire the LTV metric For many mobile advertisers, the LTV / CAC ratio sits at the very heart of commercial operations — LTV / CAC is the fundamental measurement of product viability, encapsulating both marketing efficiency and product monetization. But the LTV metric is an anachronism on mobile. For one, no one thinks about monetization on the basis of some abstract “lifetime”: in this second act of the mobile economy, users are sticky, products are enduring, and monetization streams are complex. Rather, marketers should approach growth from the opposite perspective: what is the optimal way to structure cash flows to support the growth of the business?

I think a good indication of Apple's intention to comply with the DMA is that it has rejected Epic's alternative app marketplace submissions over similarities in button sizes and colors.

Netflix Games: mistakes and opportunities Netflix seems to be employing the same tactic with games that it does with streaming video, which is to aggregate a large pool of filler content that isn’t distinguished artistically or critically yet provides subscribers with ample opportunities to engage with the service. This ignores the qualitative differences between streaming video and games: video can be consumed passively, whereas mobile gaming demands active engagement. Games can’t attract engagement by being just good enough; there simply exists too much costless competition in mobile games to build an audience that way. Whereas streaming users are locked into their subscription services for at least a month, mobile gamers face no content switching costs. There is no viable “volume play” in a mobile gaming aggregation strategy.

The emerging marketing economist The use of any econometric, or probabilistic, model to map inputs (marketing spend) to outputs (conversions) requires something of a dual workflow: determining the commercial effects produced through different channels to allocate budget, and then actually managing campaign performance at the level of an individual channel to ensure that budget allocated there is used most efficiently. These workflows don’t operate on the same cadence: cross-channel econometric models are generally updated monthly or quarterly in order to smooth effects and capture as much meaningful data as possible, whereas campaign optimizations — for instance, creative adoption and budget allocation decisions across campaigns within a channel — tend to happen at least once per week, if not more.

Meta’s “pay or okay” model violates the DMA The EC's determination in the case of Meta's use of "pay or okay" -- that a third, suboptimally-monetized version of the service be offered if advertising and subscriptions are the monetization mechanics chosen to support the business -- imposes the requirement that the gatekeeper offer an access option to consumers that is less economically valuable to it than the others, and which may not justify offering the service at all.

As expected, the European Commission has preliminarily found Meta’s “pay-or-okay” model to violate the DMA. The EC argues that a third option that utilizes “less…personal data” must be offered to users. In other words: the EC dictates the profit margins to which gatekeepers are entitled. Firms seek to maximize profit. With large-scale digital platforms, this is often accomplished with personalized advertising. Absent the ability to do that, they’ll set an access price that achieves equivalent profit given some conversion rate. What the EC is saying is that firms must accept some sub-optimal profit margin in the case where users don’t want 1) their data used for personalized advertising or 2) to pay for access. The EC doesn’t accept that a firm dictates the terms of accessing its service; it demands that if the digital service is offered at all, a third, sub-optimally monetized version must be made available. This represents a stunning regulatory intervention into business model choice in the EU.

Reprogramming the Broken Marketing Brain Many digital-first companies see their largest single line-item expense in user acquisition, and transitioning reporting and analysis away from the models, metrics, and dashboards to which the entire company had grown accustomed represents a substantial effort. When user acquisition and performance marketing are the primary drivers of revenue for a business — which is true for many digital-first businesses! — then the perceived precision and timeliness of analytics are viewed as functionally critical. Transitioning marketing measurement away from the tools and reports that had previously dictated budgeting decisions is an intimidating, if not frightening, proposition.

There are a number of different paths to growth; no single measurement can dictate whether a product will grow profitably or not. Retention and monetization are the drivers of growth and their values determine the speed and scale at which a product reaches a mass audience. Thinking in terms of north star metrics or strict standards at the level of an individual metric is ineffective, and I’ve seen it cause thrash and tension on marketing teams. Managing growth for a consumer product is simply more difficult than optimizing any one specific metric.

Why media mix modeling fails While MMM can be a valuable tool in a suite of measurement solutions, it can't be the exclusive tool used for measuring the effectiveness of ad spend in promoting digital products. I've seen MMM be rejected by host organizations like an unsuccessful organ transplant. Integrating an MMM into a marketing workflow requires a tremendous amount of effort: in adapting that workflow to the limitations of MMM, in properly setting expectations across the broader organization, and in supplementing the MMM with other tools to service the use cases for which it is not suitable.