Why Most Apps Hit a Revenue Ceiling (and How to Plan for It) — Patrick Falzon, The App Shop

0:00hello I'm your host David Barnard and my guest today is Patrick Fen co-founder of the app shop helping companies of all sizes build grow and monetize exceptional apps on the podcast I talked with Patrick about estimating the revenue potential of an app crafting an exit strategy and why LTV is such a terrible metric hey Patrick thanks so much for joining me on the podcast today thank you for having me big fan of the podcast and big big fan of Revenue cat yeah super excited to have you on the podcast and I wanted to kick things off talking about your time at mosaic I think that's a good framing it's kind of where you

0:39learned the ropes as far as subscription app businesses go and Mosaic did a lot of really interesting stuff and built a pretty great business famously recently got sold off to bending spoons but I wanted to talk a little bit about your experience there kind of what brought you there and what your role was as context for what we're going to talk about throughout the rest of the podcast episode yeah the brief background of me is my career has been roughly split between investing and operating roles and Mosaic was actually the place where I made that transition I got introduced to Mosaic when it was actually just appal on back

1:13in the day for folks familiar with that brand appon had B really early to the mobile app ecosystem our parent company it was company called IAC had acquired them when everything was still paid downloads and so appon we owned it when it went through that transition from Paid downloads to subscriptions and we saw phenomenal growth and a ton of opportunity on the other side of that and this was at a time when I was still doing mergers and Acquisitions for IAC while I was on the team I got introduced to the appon team they had a big Vision they felt like they really unlocked something special in terms of

1:42understanding and being able to capitalize on that inapp subscription opportunity and wanted to go out and build a big portfolio of other apps and other app developers so I originally came in to help them execute on that from an m&a perspective first through the Acquisitions of itranslate and teltec it translate being the developers of itranslate teltech the developers of robokiller plus some others but robokiller was the flagship product there and then a number of other smaller deals on the other side of that so I got involved in Mosaic and then within a couple years I actually ended up running both it translate and teltech as the

2:13general manager of those two businesses while still doing the m& for Mosaic so I got to see the landscape I think from a couple different lenses one both from the investing and the operating side over a multi-year period and then also really got to ride that growth of the mobile app industry again like we were pretty early to subscribe and when there was kind of like just infinite growth it felt like in those early days all the way to through to now where I think it's a much more mature ecosystem everyone's on subscriptions there's a lot more defined best practices around how to do it I and frankly I also think in some

2:43ways growth is maybe harder than it used to be and it takes more execution than it used to so it's been a really fun journey and all I would say is that Mosaic we do feel like we accomplished a lot we felt like we built one of the leading portfolios in the space had a great exit to bending spoons hope they do well with the portfolio on the other side of it it I'm and excited for what comes next yeah it must have been a fascinating time going from that single kind of portfolio of apps with appal on to then acquiring and getting to kind of

3:10peek inside a lot of app businesses in the m&a role and then actually become an operator over teltech which I know rer killer was one of the kind of Flagship apps of the Mosaic portfolio while still doing additional m&a along the way so it's like you were both kind of seeing what was going on and inside these other businesses that Mosaic might want to buy but then also like implementing those strategies within the existing portfolio company so you just have such a unique perspective and again that's why I think it it's going to be a really fascinating chat today to kind of learn from those experiences you know kind of one of the

3:47top and one of the early movers in this subscription app space so the first thing I wanted to talk about is Market sizing and this is something you must have thought a lot about when you had your m&a hat on was how big is this Market going to be for this app you know how much can we afford to pay how much do we think this is going to grow because you know famously Mosaic didn't just buy up a bunch of apps like there's a lot of companies now that'll just buy any app that's doing you know 10K a month 100K a month and it seems like

4:17there's not as focused a strategy but with Mosaic there was it seems like a lot more thoughtful approach to like trying to buy apps that could be big and then the other thing I imagine as general manager at rubber killer then you also had to think about like what's the opportunity of any new feature we build and those are probably two very similar problem spaces to think about like we have this existing app that has a market cap is this secondary product Market fit should this be a new app and there there's so much intertwined with those two so I want to kind of lump those together let's kick it off like

4:51how did you think about in acquiring a new app or going into a new line of business like how to really understand that potential t for that app yeah yeah so we did think about it across a couple different lenses so one was just Market size um you are right we went for depth so we needed to believe that you could have a product that did tens of millions of dollars of Revenue was kind of a rough Benchmark we had for ourselves the main reason we did that and I I think one of the challenges when you go more Downstream than that is you can easily

5:20end up with a portfolio of like 50 to 100 apps that each do you know a couple hundred, of Revenue and your overall p&l looks good but it is really complex managing that many apps one and two what it probably means is you're very rarely actually investing in each of those apps maybe there's a couple you do but you have this long taale of kind of like Zombie products where they're making revenue for for you and maybe that makes Financial sense but it was hard for us to justify that we were truly satisfying those users or providing value on the other side of that and that's why we

5:50tried to shy away from that and really wanted to buy products where we felt like or build products where we felt like this was an enduring product an enduring category we can invest in it and actually provide value to users on an ongoing basis and be rewarded for that so we did look for depth now on the flip side of that I do think there's a double-edged sort on your Tam where I could also think about like you should think about how big do you really want to play in because it gets into the second lens which is competition and typically the bigger markets are going

6:16to have more competition and you have to think about how you how you think about those trade-offs between those two things meaning a big Market is great only if you can take a substantial share of that market or a specific share of that market if is so competitive that you can't actually Garner market share it's not actually valuable to you so we thought about size and competition as a balance between each other and I think there's a little bit of like a Goldilocks approach you can take to those things of markets that are big enough to create enduring products and businesses but you could still be maybe

6:49a relative big fish in a smaller Pond and that's not necessarily a terrible place for you to play do you have some concrete examples of like I mean let's take ROK Killer maybe as an example of something that Mosaic did buy so what was a thought there on like how big that market was and the thesis behind playing in that market versus and then maybe an example of a market that was maybe too competitive where you're where you looked at an acquisition and felt like this is too big of space to compete in yeah so the r example the basic thesis there is it's a broadly applicable

7:22product everyone get spam calls or spam texts to a degree there are certain demographics that care more about solving that problem than others but we got comfortable that it was a broadly appearing appealing product that could generate again tens of millions of dollars of Revenue and then we looked at the competitive landscape and robokiller was the leader you had carriers are somewhat relevant here but they're not really invested in solving the solution for a variety of reasons that are probably more of a rabbit hole than worth getting into here so we looked at this is a problem that needs to be solved by independent tools this is the

7:52leading independent tool there aren't major players entering this space from adjacent categories so again good good competitive Dynamics I think one you can think about in the other direction categories that we never got in ourselves two examples that come to mind are vpns VPN is a massive category but there's also already a lot of people making a lot of money there so if you want to enter that category you have to be prepared to spend a lot of money on user acquisition to be able to Garner market share because everyone else is spending a lot of money on user acquisition and if you don't play that

8:25game there is no game to play so that was one we shied away from because we said the uni economics are not going to makes sense for us long term we have to be so reliant on aggressive paid marketing slightly different lens but similar rationale is we never got into personal budgeting or Finance for a similar but slightly different reason in the sense that we thought the adjacent competitors in Banks and more traditional financial institutions made that challenging long term because similarly when you go out to acquire users if you think about like what you're actually acquiring them for you're acquiring them for financial management or budgeting or like their

8:57money and how should they manage that those are the same desires and objectives and keywords to be like very tactical that like a bank would potentially want to acquire that customer for and the bank is is going to have a much much higher LTV than you are ever going to have on your budgeting app and so like you will always lose that battle because they'll always be willing to pay more for that customer than you so again that was when we looked at and said there's a lot of interesting things in the category a lot of interesting features that make those products attractive but we don't think we can

9:27effectively compete there in the long term ter because it is such a big and attractive Market because the ltbs can be so high if you actually provide the financial services which is not something we're ever going to do yeah I know that makes a ton of sense and then you had a followup I kind of interrupted you but I appreciate the kind of like concrete examples and I think again super helpful for folks to think about as they're thinking about growing their business and those same competitive Dynamics I mean you know I know folks in the meditation space and the language learning space and it's like yeah those

9:54are big spaces but it's important to understand those competitive Dynamics and understand the challenges you're going to face along the way butow you had more to say one point on that I'd say is in those spaces I think there is an argument for if you're bringing something truly new and Innovative to the table like the whole like are you 10x better than the current Solutions not to say you shouldn't try but that just being 10x better doesn't solve all those Dynamics meaning like you still have to get your product in the hands of users and let them see that you're 10x better so you still need to have a

10:24strategy for how you going to do that user acquisition if everyone's already doing paid and they're already gobbling up that top of the funnel and then the third lens I was going to add is we thought a lot about are we tapping into existing demand or do we have to go out and build a new product category not to say one is always going to be better than the other they're just different and they have different different Capital requirements so the way we thought about it was if you're tapping into existing demand you're probably going to have more competition up front but it's typically a lower capital

10:53investment because you can start doing things like Performance Marketing right away or ASO right away and start getting users in in a relatively profitable or rational way if you have to go out and build a new category people don't know this product exists you're the first to Market you have to build demand for it you're probably running at a loss for some period of time while you go out and do that and so you need to factor that into your thinking of can I do that and am I willing to do that so I think particularly for independent app developers one thing I talk to developers a lot about is like that's a

11:24really great idea and that's really exciting like do you have the resources to see it through and scale it on the other side of that though I think that's how you should think about it yeah and then how did you apply that thinking how do you today apply that thinking when it comes to building new features I mean this is something where folks maybe aren't always strategic enough it's like ah we'll build this new feature because it's cool but like then I imagine there's some thought that should go into is this a secondary product Market fit is there a keyword that this feature is going to allow us to compete on that

11:58we're not comp on currently or like what was the the kind of strategic thinking behind expanding feature sets and secondary product Market fit and then even where like where maybe spinning up a new app was a better solution than kind of adding features to an existing app yeah so I think you hit on all the main points the one thing I'd say up front is the biggest mistake I see to your point on building features because they're cool is teams build what they think should be in the product and what they think would be cool to be in the product and at no point do they talk to

12:28the user and try and understand what do your users want and are you building what they want and need it's really easy to just keep building what you think is cool and then those features never get used and they get lost in the shuffle and you end up with kind of a crowded product on the other side of that so strongly recommend like talk to your users get feedback from them around what they want because ultimately that's what matters you're not building a product for yourself you're building a product for other people within that though we did think about it in terms of so when we're building a new feature is it a

12:55feature or a product my general bias in the mobile space is towards Slimmer products and being okay having multiple products that serve adjacent use cases I think the mobile form factor has a lot of benefits but it also has some limitations and I think having a product that for example has like eight different features on a smartphone app and like a 6-in screen it's very hard to get users to understand all of those features and effectively switch between them and use them and I think maybe having two or three products that have two two or three features each could actually deliver more value and you may

13:33even get more financial value out of it because you could better segment users into the product that actually suits their needs so we did think a lot about that and we generally aired on the side of less features and being more willing to just build a net new product if we thought there was demand there and then we were actually doing features so we went through that analysis and said this should be a feature in the product two ways we thought about it there which is are we trying to increase arpo or are we trying to increase retention and I would say all of your features should fit into

13:58one of those two buckets cuz I'm not sure what the other rationale for releasing a new feature is if you're not going to increase RP retention that's a great lens so then you have to think about like what am I really trying to achieve with that so we had some features where we released and it was an upsell and we said this is you know an adjacent use case it helps solve the same problem one example is in Robo killer we integrated data broker removal service and that was an upsell so we sold you into the base subscription and then we said do you also want this on

14:23the other side was really successful a really good way to increase RPO and it made sense having it as a feature within the product there are other things you're going to release or features you're going to release where it's more about retention and engagement and I think the strategies for how you develop those products or those features sorry and how you Market those to your user bases are very different so having that Clarity up front is this a retention oriented or an R oriented feature I do think is very important in thinking about that kind of Market sizing both for features that you're adding on to

14:58and new apps or new lines of business one of the things I know comes up a lot in the industry is how many apps seem to get stuck in this like 10 to 30 million a year Revenue threshold how did you think about hitting that ceiling like why some apps hit the ceiling and then why some apps don't and how to push through that maybe not the answer everyone's gonna want to hear here I tend to think most apps will hit that ceiling and it's actually very hard to break through it so the way we tended to think about it and the way I still think

15:31about it today is more of accepting that as a constraint for the mobile business and then how do you architect around it or how do you build a business given that constraint and and I think there's a couple reasons why that's just a real constraint one is if you think about like user acquisition at a very basic level you're going to get organic users people just coming to the App Store searching for things and they find your app as a result of it and download it then you're going to do paid user acquisition and go out and bring user pull users into your app on the organic

16:01side it's hard for any individual developer to materially move the amount of searches happen in the App Store like that's a pretty static figure that's relatively out of your control so all you can do is increase your ranking for those keywords and at some point you're going to hit your enough top three rankings you're going to get your rankings and they're going to stop being able to move and you're going to almost like maximize your share of that organic pie now not everyone always hits that point but like there is a cap on the organic side for most products and then you get to the paid side and I think the

16:32challenge there is most people similarly hit a ceiling on the paid side because mobile ltvs just aren't in the grand scheme of things if you go to like other markets like B2B SAS ltvs and mobile are pretty low most people are operating under $100 subscriber LTV so there's only so much you can then pay to acquire a subscriber and then basically what happens is you're going to keep spending and at some point your CAC is going to reach that maximum and you can't spend more unpaid without going unprofitable so you decide to stop spending and then when those two things happen that's when you kind of hit a ceiling on your growth

17:06and you can get you know call it single digit growth on the other side of that through LTV improvements testing conversion rate improvements things like that but you're not going to be doubling in size on the other side of that I think that's a very real constraint for a lot of apps and a lot of mobile first products though again the way we think about it is that's why you see a lot of portfolios where it's okay if you accept that as a constraint the other way to grow is to have multiple products and if you have three $30 million products that's just potentially as good and

17:35maybe even better because of the diversification benefit of having one single $90 million Revenue product so I do think it's a real constraint I don't think it's a constraint on the ability to build great mobile businesses though and I actually think it could be an opportunity if thought about the right way yeah but an important thing to think about especially for those who've raised funding and kind of increased the bar of success is that to understand this eventuality is important and one of the more interesting ideas on that paid front that I've heard Eric suer gosh probably like six or eight years ago talked about how this idea that if there

18:12is ultimately kind of a a limited ideal customer profile for your app in a limited pool of people especially willing to pay whatever you know higher price which a lot of apps are kind of tending toward now there is a limited pool of people who care enough to subscribe to an app that does XYZ and the more you spend and the more you're willing to stretch your CAC the faster you saturate that pool and you still end up at that same eventuality so if today you're growing at 200% and like things you just feels like you can't spend enough and you're just going so fast you may just be rushing faster

18:56toward that same Cliff not necess neily kind of escaping the laws of thermodynamics and the speed at which you're currently going isn't necessarily sustainable just because you seem to be accelerating faster than other apps as you've said and I'll reiterate like I don't think this is universally true there are going to be breakout products like a dualingo but it's like those are the exceptions that prove the rule that there are just so many spaces that don't have a big enough Tam don't have enough kind of willing consumers to pay these higher prices that make the return on ads spin work that you are going to find

19:32some ceiling and for some apps it actually may be lower than that 10 to 30 million doll threshold for some apps it may be a little higher and then you're going to have those that break through but kind of understanding those Dynamics I think is super important in kind of informing strategy how much you're willing to spend how much you're willing to stretch out your payback periods how fast you're willing to invest that revenue and things along those lines and I actually think on that point one thing to Think Through is actually think about a lot of those exceptions like a dual lingo even a Spotify is inherently

20:02mobile first product a Common Thread I see at least is they have big free user bases or at least for a large part of their life had very big free user bases I say this as someone who has always prioritized limited free user free usage or free user basis I'm in favor of even like hard pay walls in some examples but you have to also accept when you're doing that you are playing into the I'm probably capping this 10 20 30 million of Revenue there are not very many paid only subscription products outside of the streaming world that really gain traction without that substantial free user base that drives

20:37adoption in community and brand yeah that's a really good point how do you think retention plays into all this because for an app that does actually have ridiculously good retention you can still build a great business layering those cohorts year after year after year where even if you kind of max out the number of users you can acquire if you're actually retaining a much higher percentage you can still continue growing at high rates but that's a challenge yeah I I do think that's the path forward and I think that's what you should be focused on is like one of your most important signals in your business is how do your

21:16subscribers retain and what's that average life cycle and you want to be higher and longer as much as possible but even there I think there's two challenges coming back to why things cap out one it comes back to LTV your retention a very obviously an important input to your LTV and in the mobile app space like great retention is often like on a blended basis across all your durations 50% of subscribers every year is like you're doing pretty well if you're doing that but that also means 50% of your cohort is leaving at the end of that year so that's one going to impact your LTV like if you think about

21:50B2B SAS they're at like you know sometimes over 100% retention because they're actually upselling that's a very different world they're living in from an LTV perspective and then two like again if your incoming new users is flat so your cohort size is flat and you're turning out half of the cohorts every year like you can only grow so much now like higher retention is better these are still recurring businesses and as you get into years like two three four five for a lot of these cohorts it's actually much higher than 50% retention is what you're seeing so you definitely get a stacking benefit as you drag these

22:24things out I do think you one way to optimize that is to your earlier point is like don't blow the doors off marketing right away and like have one giant cohort that's going to slowly at trit over time be patient and bring in more evenly sized cohorts over a multi-year period and you can actually potentially get much better recurring revenue and like a much more evenly spaced out renewal base across various points on that renewal curve so you can get really sticky bases of Revenue that are good relative sizes to those new users that are coming in and then part of this whole topic around like hitting these caps and the reason

23:03folks think about these things is that especially if you've you know taken any amount of funding but even if you haven't I think a lot of people are thinking about the in eventuality of a potential exit so then how an potential exit come into play with these challenges in scale what do you think the range of potential outcomes exist for subscription app today so the outliers like dual lingo you can IPO that's that's an awesome strategy if you can execute on it and out setting that one aside because I do think that's the exception not the norm typically what we'd see is there's three buyers of

23:42these assets if you want an exit one is you could sell to there are many portfolio place in this space people who are rolling up Diversified portfolios of apps they're always willing to take a look at things I think they're a very willing seller probably your most realistic seller theirs business is buying and selling apps so they're probably going to be more regimented on valuation than some of your other buyers because like their whole thing is they have to get good Roi in every single deal for their business model to work so they're going to be pretty strict on their valuations second is you can sell

24:13to private Equity there are some small scale private Equity players who are interested in this space I think the key there though is it's hard to sell them a single app so if you're just a single app developer you're probably looking at the app rollup portfolios if you've built a portfolio of app you can be be able to hand off almost more of like a business than a product to those private Equity players and you can say hey I have these three apps and I have a Consolidated Tex stack behind it and this is a great platform that you can go out and add more products to that's a

24:44story and like a narrative that can get you into the kind of lower end of private equity and get an exit there and then lastly for certain apps I think strategic buyers are very real like you saw Under Armour what was that 5 10 years ago at this point did a buch of Acquisitions in the space I think you can see similar things where there's a strategic who has a strong rationale for wanting to buy your product that's probably for any given product there's going to be a handful of companies that you'll know will make sense for that but you can have an eye towards trying to

25:14establish relationships or making yourself visible to them to set up that potential exit and then the last one I always advis people also like I don't think everyone has to exit per se Again part of the benefit is these are recurring businesses you can build up a sticky renewal base and maybe the right thing for you is to actually just at some point shift a little bit more into maintenance mode where if what you're trying to do is spend more time on other things you do that but you still take your cash flow from maintaining a product and continuing to provide the value that those users thought they were

25:45getting when they purchased the product I mean I think like in the mobile app space you could do that with a reasonable time commitment that still allows you to go do other things yeah I want to step back to the Strategic buyer it seems like we saw a lot more of this early on I don't feel like I've seen as much of this recently although maybe I'm just not paying enough attention to the m&a space but have you seen any kind of strategic Acquisitions that you think are interesting or do you see specific categories and companies that might make sense for these kind of strategic purchases yeah I do think you can so

26:21like actually the budgeting space as one example rocket mortgage bought I think was true bill at the time and now it's rocket money um because for them that's actually to the reason why we never found the category attractive it's a great customer acquisition funnel for them of getting people into their budgeting tool and then selling them actual Financial products on the other side of that so I think Financial Services is definitely one where you can continue to see that I think privacy security is another area where you have some big consumer Brands like the Nortons of the world and the mcafe and things like that where they could still

26:53be interested in maybe increasing their mobile presence or their mobile brand those are the the two big ones that stand out to me and they also think health and wellness although to your point I think that's one where we've seen that fade recently and I generally agree with your classification here which is if you look back like 10 or 15 years mobile was this like exciting new platform and and was like desktop versus mobile I think we're kind of on the other side of that where mobile is more of a standard and just kind of baked into everything everyone does and most people have some degree of mobile and

27:25desktop presence so I do think it's you had Rush early on where it was like every Big company felt like they had to have a mobile play and they were using m&a as a way to accomplish that and now I think it actually is more tightly tied to product fit and like does this product make sense does it generate us more revenue does it help lower our customer acquisition cost not just like mobile for the sake of mobile which you got more of in you know 15 years ago yeah and and two recent acquisitions that I think point to that is both Under arour And The Weather Channel selling to

28:01Francisco Partners private Equity Firm where both of those I would have guessed you know had you asked me three years ago who would buy something like that I mean famously IBM actually bought the Weather Channel and from what I understand they still maintain the B2B side of the weather business and then Under Armour having bought my fitness pal and a few others and a few others and then they spun it out and now it's landed at private equity it's like my fitness pal kind of being a darling of the health and wellness space it's like if somebody was going to get a strategic acquisition by a bigger player that's

28:38one that I would have guessed would and they didn't so those are I think two data points showing yeah maybe the Strategic acquisition space is limited but then one other data point on the other side is you know Z Davis acquired L it recently that is in the health and wellness space they're a big media conglomerate so it's like there are still opportunities but it's just yeah it seems very different in 2024 than it has been yeah it's going to be a very small Universe typically when we would do I also worked on sales out of our portfolio at IAC when we'd make buyers list for most companies your strategic

29:15buyers are like five to 10 potential and then you have a list of like a 100 Financial buyers who could potentially be interested in it and I think that's going to stay true here where it's a very small population potential strategics and a much larger population more financially motivated buyers yeah I think few people listening to this podcast don't have some inkling in the back of their mind like an acquisition or some kind of bigger liquidity event would be an interesting Prospect in the future and so kind of understanding those dyn Dynamics I think is important the other thing I'd advise is if that is what you're optimizing for if that's

29:48what you seriously want the end goal to be build towards that goal don't just assume it's going to happen like be thoughtful around who is a potential buyer what what can I do to make this more interesting to that buyer or even like if you haven't built a thing yet and you want to build a thing to get acquired like have that be part of your selection criteria of what you're going to build is what does the acquisition pool look like for this thing and therefore do I want to build it or not that both from a prodct perspective and then I'd also say from an operational

30:16perspective the cleaner and more professionalized your setup is the easier it's going to be to find a buyer for that buyers don't love messiness they're already taking on a lot of Risk by doing an upfront p for an uncertain outcome on the other side anything you could do to reduce that messiness for them is great yeah any other advice on kind of opening up those potential doors strategic or PE I mean imagine like if you're building toward a private Equity exit and you think that's kind of the maximum the optimal return Then building something that's throwing off cash and being more careful more disciplined with spin being more disciplined with

30:55expenses like showing that profitability or the the opportunity for profitability is something that is going to be way more valued by private Equity again maybe you shouldn't be building exclusively this direction because we know it's such a limited pool of potential outcomes but if you are hoping for strategic acquisition would you then maybe be trying to build a more of a brand or or have a unique take or any advice on that spectrum of building toward a hopeful exit yeah I do think particularly if you're going to be going to a financial buyer having a track record that they can understand and project out and say if I just do more of

31:36that this is going to go well for me is important so for example you've been running unprofitably your entire life and then you go to them and say but if you buy this it's going to become profitable like that's just a harder Hill for them to get over as opposed to saying look it's already been profitable for the last three years just keep doing XYZ and this is going to go well for you that's a much easier narrative to sell them so I do think being to a point where you are either already profitable or your union economics are clearly going to drive profitability in the

32:05future even if like right now it's not immediately profitable that is great for the financial buyers it does probably matter a bit less for the Strategic buyers and I do think like brand and maybe even just like the size of your user base matters more for strategics I think for example strategics will always Place more value on free users and Community than a financial buyer will so there are differences there in terms of what they're kind of value yeah well this has been fascinating I mean picking your brain having been in this space for so long and looking at so many apps over such a long period of

32:38time both I didn't even think about that you would be working on selling parts of iac's portfolio while also potentially acquiring others so you've been both on the buy side and the S side of this in a really interesting way and across many years of kind of ups and downs of the industry so yeah that was really fascinating thanks for sharing all those insights so I did want to dive into the more kind of tactical side of things that you you learned running as a GM of it translate and robok killer the first one there is how to think about user acquisition LTV CAC paybacks I mean

33:18it's just such a big hairy mess and yeah I mean it's actually something we're thinking a lot about at Revenue cat you we now do have some LTV predictions we're kind of teas are are going to be adding those to our experiments feature but It's Tricky and like we've actually been really careful and turtl and had a lot of like thought around how we build these products because it's really easy to just throw a pltv stat out there but like what does it actually mean can I trust it can I buy against it is a really important question so so yeah I'd love to hear kind of your thoughts

33:55around how to think about these metrics LTV is heart particularly if you're in the early days what I advise people to do is think more about your range of possible outcomes because the reality is you have very limited data that data is not going to tell you a perfect story on the other side of it and say with 100% confidence this cohort LTV is going to be X you're getting a directional estimate at best so the way we do it in the early days of a product and what I advise people we work with to do is run a range of scenarios and say you know

34:24plus or minus 20% and maybe 5% increments what are my Poss possible ltvs assign some probabilities to them come up with your best estimate start making decisions and acting on that and then just go back and check it every month or two months as you're getting that retention data in start validating and what you could hopefully start doing is if you start with hey I have six possible ltvs then I'm giving some waiting to each of them then you can get it down to four ltvs over time and then two then three or you know however that goes and eventually get to a more precise LTV estimate that you're going

34:54to have but like you're going to need mature just from a scale perspective to get to a relatively precise LTV like you need multiple years of data realistically to be able to reliably predict that so that's okay in my mind you just have to again like know where you're at in that cycle are you in the less certain and therefore you need to be more flexible and dynamic or are you in the more certain side of your cycle where you're more mature and you can kind of have more of a singular Target of how you think about things and maybe this is one of those things you need to like kind of

35:24pick a point in time and say what's my LTV going to be at one year what's my LTV going to be at two years and kind of more cash flow prediction because LTV is such a a loaded term and that I I don't even like in the subscription app industry in that I've seen with my own app I launched it my weather my dinky little like side project weather app launched it seven years ago and still to this day I've retained like 10 15% of the original cohort who who bought it s years ago and so trying to estimate that into the future and then saying my

36:02seven-year LTV is going to be X you can't actually calculate the average lifetime value of a user because it can go decades into the future I mean there's products like Netflix I subscribed to Netflix as a DVD customer in 200 what 4 or something you know 2001 and then I transitioned from DVDs to their streaming service and I've been a monthly paid C customer for close to 20 years now I think that's where the rest of the industry is going like a weather app whether it's on AR glasses 10 years from now you know I'm probably going to have users that have 20y year lifetime 30e lifetimes even my simple little

36:46dinky side project weather app I'm ranting here but it's like I don't like LTV as a term because of that because nobody really you can't actually estimate an average life time value of a user but you need some Metric to buy against for cash flow and that's where actually you know this is something Dan he is a colleague of mine at Revenue cat formerly a colleague of yours at teltech at rubber killer and he brought to our charge this metric called realized LTV the way I think about it is like day x realized LTV because in the revenue catch chart you can actually pick like how much revenue have I made on this

37:28cohort at 30 days at 90 days at a year and and you there's a little drop down that you can select it and to me that's just such a more helpful way to think about quote unquote lifetime value is more like pick different time points and do those calculations toward like what's the range of expected Revenue at 12 months at 24 months at 36 months because that it just feels like that's so much more helpful than thinking of it as just like this is all the money I'm ever going to make from this cohort and here's the line I'm drawing in this hand totally agree a couple thoughts there

38:06one we always did Caper ltvs so to your point maybe calling them lifetimes is not actually a Accurate Way of framing that but we typically would cap them at a certain number of years for two reasons one is like you have to get paid back at some point so like you have to care about your payback period if you're buying against a 20-year LTV maybe you're not even making a profit here 15 and like that's not a super functional business model to be managing and then two is not to get like too Finance nerd on people there's a time value of money so like a dollar in 20 years is worth

38:38less than a dollar today so even if you're still having some of your cohort renewing and paying you in 20 years if you discount that back to what is that actually Worth to me today it may be very minimal and therefore not actually worth baking into your LTV so we did cap it I would advise people to cap it and then also to your point I I think coming back to like where are you at in your maturity life cycle you also need to think about payback periods so like typically what we say is like when you're earlier in your life cycle you can't be waiting 12 months to make a

39:05profit on a cohort you need to have tighter payback Windows because you just don't have a lot of cash on hand to spend when you're later in your life and you have more money in the bank you could potentially think about you know if maybe you started a 2-year LTV maybe you start expanding that to a three or fouryear LTV and being okay having a 12 plus month payback period I again I think you can play with those ever as time goes on but I would definitely advise capping your LTV it just will make your life simpler and easier and it's a at worst you're being

39:36conservative and like that's not a terrible thing to do and that I would think about payback periods as almost like a separate and distinct metric from your LTB to CAC or your row ass but then how does that work out practically like in what time frames would you cap your LTV like would you look at a particular app and say based on the cash flow of this app we need RADS at day 90 and so we're going to predict I mean would you call that a predicted I mean again it's like you're not predicting lifetime value so you're predicting cash flow within 90 days not an actual lifetime

40:12how did you do those specific kind of projections like what's our cash flow going to be at nine months 90 days at at nine months at 12 months how did you think about that tactically yeah so we did have an in-house proprietary system forecasting ltvs again we benefited from being more mature so we had a ton of data on all of our products where if we got you know an initial renewal point or initial Che renewal points from a given cohort we could pretty reliably predict out then what the next 20 would look like from there and also what you see is typically in those first couple renewals

40:44is actually where you see the bulk of your turn and then it starts flatlining after that so we were able to pretty reliably predict those and then we manag on LTV to CAC predominantly I think of them as two separate ways I think you either have a primary filter of what's my payback period And basically I'm at a stage in my company's life cycle where I need to make my money back either in in the first month or in the first three months and therefore that's the primary thing I'm optimizing for and then secondarily I'm looking at LTV to CAC to understand what that looks like because

41:12what you may find is okay I need to get paid back same month but then what I see is I have a crazy high LTV to CAC so once I solve my like cash liquidity problem and I can extend that payback period I now know that I can spend a lot more money and still have a healthy LTV a CA so then you can think about like what do you need to do from a business perspective to unlock growth which is find liquidity somehow right alternatively later in life you're going to be probably more focused on LTV to CAC and say okay I have a threshold has

41:41to be above the certain LTV to CAC and your payback period is almost more of like a sanity check on the side of okay if I if I'm targeting a two or three x LTV to CAC I want to know how long I'm getting it's taking to get me paid back but that's probably not the thing that's driving your business decisions it's just more of a nice to know on the side yeah did you have any particular moments where specific new ad spend or even specific new ad creatives or new prices or any specific changes that you saw break your model did you have moments where like oh we you know ramped up

42:20spend on meta and everything looked great ltvs were amazing and then like you do the 3mon look back you're like oh crap like we were 25% under what we predicted like this cohort sucked like we shouldn't keep acquiring these users in that way you have any specific examples like that a lot a short answer so it's definitely a thing a couple quick examples so on price testing that was always an issue we generally so we generally skewed either annual or monthly subscriptions or some combination of the two you can pretty easily get a sense for what's going to happen to your monthly subscriber retention when you're running a price

42:58test if you're willing to wait you know a little bit of time you're obviously not going to have data on what happens to your annual subscribers retention though when you're making that decision like no one's reasonably waiting over a year to make a call on a price test so you have to make some simplifying assumptions there we typically what we would do is look at the impact on monthly subscriber retention and say in theory the annual retention impact should approximate what we're seeing in monthly subscribers that was not always true though and in particular if like one is clearly your primary plan and one is your secondary plan so it's like a

43:297030 split between those durations they won't actually always work the same so we often with price tests particularly if they were overweight annual subscriptions sometimes we'd make calls and then you'd see those cohorts come in a year plus later and you'd be like ah like that maybe wasn't the right call unfortunately or you're very pleasantly surprised and it was a better call than you even anticipated I don't have a great solution for avoiding that what I typically advise people is you're going to look at your ab test results and just sensitize it to say if retention comes in 10% worse does it change my answer of

44:01if I should roll this that or not if it comes in 20% worse does it change my answer and then make a decision based on your relative Comfort level there like if you have only have a 5% buffer on retention before this price test winner is no longer a winner maybe don't roll that one out or maybe be more cautious about how you roll that one out if retention can go down by 50% and that thing's still a winner like close your eyes and roll it out you're going to be fine with any reasonable outcomes there so I I would say sensitize price test is a big learning we've had particularly

44:29when your annual subscriptions and then new marketing channels is definitely a thing I think a couple implications of that are like when you're ramping up on or you're launching a new channel or you're ramping up on a new channel be a little conservative like don't go full bore my experience is actual performance almost always contracts from that initial predicted performance when you're doing a new channel because a combination of retention is probably going to come in a little bit worse than you were expecting that's just life and like those first handful of users you acquire are almost always the cheapest users you're going to acquire and like

45:04eventually it's going to start getting more expensive and eventually it's going to start Contracting on you so like patience is important there and give it a little bit to play out before you just like say I want to pour gas on the fire I do see sometimes people are a little too quick to in their minds pour gas on a fire that may not be real so I do think you have to think about that but it's I think just something you have to factor into your decision- making and it's just a reality of the world we live in yeah how much did you think about the

45:33impact and how much did you see the impact of price on those longer retention periods so I feel like it's a bit of a trend and I've talked about it a lot on the podcast I actually talked about it on the episode just before this one that these much higher subscription prices do work really well to get that payback quickly like this shift toward annual subscriptions and then more specifically the shift toward higher priced annual subscriptions is closing the loop on being able to get that like sday return on ad spin for some apps that seem to be doing really well and finding the right creatives and stuff

46:13like that but then just inherently the higher your price there's going to be some impact on CH and how do you think about balancing those things and what did you see in the data as you looked at some of these bigger cohorts in the Mosaic portfolio retention as a general rule decreases as price increases so you should think of those as inversely correlated basic logic holds if someone's paying more for something they're more sensitive to the value they're getting out of it so we did see that on the whole it is definitely not a onetoone relationship meaning you're going to net get LTV wins most of the

46:47time assuming conversion rates line up so we typically see if you increase price 10% maybe retention comes down by a couple percent for example and then it's also not one size fits so some products saw it more than others and particularly like I always advocate for being really honest with yourself around like what your product does and the value it provides I think there are a lot of very successful and very profitable and great products in the mobile space that provide a somewhat thin layer of value and I don't say that with like any negativity associated with it like they provide a distinct value but it's thin and like you they built a

47:25great business around that but like be realistic about that and know that there's then probably a lower ceiling on how much you can charge for that value there are other products that are like dual lingo or language learning is potentially an example there where it's like there's a really deep Corpus of content underlying them like you're truly teaching someone a skill a thing that they pay in the real world maybe thousands of dollars to go somewhere to learn you have more Price Power there so like be honest with yourself about how much value you're providing there aren't necessarily wrong answers there the most important thing is just be honest with

47:54yourself yeah and were there specific like leading indicators that you would look at to understand how price especially on annuals because again so much of the industry is Shifting toward annual to get those earlier paybacks but then it lengthens the feedback loop like were you feeding into the the payback model and the retention model and the ab test results early turning off auto renew engagement data like what were the factors that helped you get a window into the future performance when the real data was going to be 12 months out yeah so a couple of things so like I said if you have a shorter term

48:31subscription like a monthly subscription seeing the impact on that retention from a similar price increase and being able to extrapolate it out similarly if you've raised price before and you said okay last time I raised an annual price 10% this is what happened to retention using that as a indicator of what could happen in the future works also if you have a free trial trial to paid conversion is typically going to be a leading indicator of retention on the other side so if you're seeing a drop in trial to paid you're probably going to see a drop in retention not necess one to one again but it's a leading

49:00indicator we did not see a lot of success using early cancellation rates as a predictor of churn we just didn't uh we did a lot of testing around it only a fraction of users actually cancel early what you see is you get a lot of cancellations like right around the renewal point when they're kind of getting those emails letting them know that it's coming up so we did not end up we used it it was not a particularly valuable data point for us I think engagement can be a valuable data point if you have the clarity and the tracking and like the good data around those

49:31features so if you have like a key action the user is going to take in your app or a key feature that they need to use being able to track that and making sure people are still doing that and still doing that on a recurring basis I think can be a good indicator is definitely a good indicator that one gets trickier to feed back into do something like an LTV algorithm though so that's the I think the challenge there often times what I see is that's almost used as like a thing that sits on the side where you have your LTV algorithm and then you're looking at your cohorts and are they

50:01doing that action and then you're making some in your head like mental adjustment to what your LTV algorithm is saying because it's just hard to feed those back in no that makes a lot of sense so it's like if the LTV is saying this but we see usage retention differing from past cohorts then I should buy 10% then we should discount that LTV 10% I mean yeah something I've talked about before like in a in a talk I gave and we have talked about on the podcast but I loved your Insight on Are there specific things that are going to be the most meaningful to track to get that sense

50:38like do you need to pick one specific core user flow one specific key value that the app delivers is there like I mean I guess every app's going to have their own thing any tips on like picking that user action that's going to most strongly correlate with retention which then is going to help more more strongly correlate with LTV and your financial projections yes we tried to have one or two Maxs for every product I think if you have like seven then you just you're creating noise and the actual signal is getting lost in that noise so really think about like the one or two key

51:14things so for example like robokiller it was actually less about what was the user doing it was more about are they actually getting spam calls and are we blocking calls on their behalf and trying to understand like the passive use yeah like it are we providing the value that the user came to us for and that that may not be dependent on an action they've taken so that's the lens I would suggest applying is it's more about the is your product providing the value that may be because we have another uh app called table call which is a call recorder the value there is recording a

51:46call that has to be a user action so there it is a user action did they actually record a call but again the verbal Cod example it it's not actually a user action you're looking for it's just a thing that happens in their environment and you're confirming that they are getting spam calls we are blocking them on their behalf and therefore they're getting value out of it and actually even there like we had two metrics of are the getting spam calls now we blocking them and then also did we get one wrong and for us that was actually the big flag for us when we needed to do something proactive about

52:14retention if we saw we got something wrong for a user that was highly correlated with churn so then we needed to remediate that in some way shape or form probably a good exercise for any app that hasn't already done this this is do some user surveys do some user interviews pump all your reviews into chat GPT and figure out like why are people actually paying for the app like what really is the value and I like that one that robokiller example is so good is that people aren't paying to interact with the app they're paying to not interact with the app they're paying for the app to sit in the background and

52:54block those calls at time s an inverse correlation between how much you used robok killer and how happy you were with the product where it's like if you were using it a lot you actually probably were a less satisfied user because you were trying to do all these like tweaks and coming in to check things did we really get it right like our happiest users kind of forgot we were installed on their phone in a good way even in that case I mean this is maybe a rabbit hole to the current conversation but were there ways in which the user did see robok killer taking action like

53:23would it pop up a notification like robok killer block this call or you still have to kind of reinforce the value that you're delivering like hey we blocked 50 calls for you this week alone and reminding people that how much value they're they're actually getting delivered when it's just sitting there in the background passively delivering value it was a challenge for us for a couple technical reasons namely around Apple limitations or around the data you do and don't have on a user level and then also our own privacy layer we had put on top of that but like think of creative ways around that so one thing

53:53we did is we generally de anonymized like all day data cuz we thought that was the right thing to do so instead of giving you necessar personalized stats we would give you stats across the whole user base of we've lock this many millions of calls this month for our users so still being able to demonstrate like we are doing things we are providing value even if we can't perfectly tie that to like you as an individual user all right so we've kind of been dancing around the acquisition side of things in talking about LTV and and measuring your LTV and like figuring out how your users are engaging with the

54:25value of your product but then you do have to go out and acquire those users so how did you think about marketing and customer acquisition costs and kind of keeping that in check especially in relation to LTV yeah we did think about the world in organic vers paid or two lenses we put on it and then I think you can think about your ca then both from a blended perspective so basically accounting for your organic traction and a paid only perspective and I would strongly recommend that you look at both of those me because like there are apps that you'll see that are unprofitable if you look at

55:00them on a paidon basis but profitable on a blended basis which is great and that may be the right decision for your app but that probably means you don't have a lot of growth ahead of you the more you spend on paid the more negative that's going to go and it's just going to drag down your margins so that's why it's important to understand it because it influences what you can do going forward but looking at how paid impacts the Blended because for some apps there is a little bit of a network effect where if you spend more it's also going to juice your organic so if you have any kind of

55:30like Network effect spending more maybe does balance out but for but to the point we've been making throughout this whole podcast is like that's probably the exception and for most apps you're not going to have enough of a network effect some of the things that do come into play here though is that you know as you spend more and bring in more users and get more reviews you do push yourself up the search results so that's like an important aspect but to your point earlier it's like you also cap that out it's like you know if if you can't spend more than a million dollars a month maybe you Peak at number three

56:08result for the the most valuable keyword and you just can't push it beyond that so kind of watching the interplay between paid and Blended is probably how you determine where that's going to land and I do think that's a very real effect in the mobile app ecosystem I think it has diminishing returns though so I think early in your life there is a very strong correlation between paid traction and organic growth where as you drive more paid downloads you can absolutely increase your organic installs along the way at some point you will start to see that Flatline though and like you'll get diminishing returns and for every paid

56:42install you're getting you're getting a smaller and smaller fraction of an incremental organic install as a result so again like understanding that trade-off and where you are on that curve is important because then what you're thinking about is like is all that matters my LTV to cack on that incremental of paid spend or should I actually be discounting that or maybe applying a premium to that LTV to CAC because I know I'm getting some incremental organic benefit on the other side so I I do think that's very embor I also think to the organic side of things like ASO is very critical like I think it is based on some of the data I've

57:14seen it's like over 50% of installs go to come through search and go to one of the top three rankings on search so it is really critical that you if you're going to launch a product understand what relevant keywords for your product understand what is your ability to rank on those keywords this comes back to like when you're thinking about a category in the competition like if you say I need to rank on this keyword and the first three keywords are like hundred million doll companies with massive budgets like that's probably a concern that you need to think through and think through how you're going to

57:45handle that so you're saying I shouldn't build a weather app well it seems to be a category that's done well regardless yeah but I I do think that's real where it's like you have to be really thoughtful about what are the keywords that matter and then measure where you're at on those keywords because what you want to understand is one like what's your growth opportunity and how realistic is that you can achieve that but then also like that tells you where you are in the curve of diminishing returns on your organic lift because of paid spend if you're already ranking one two three on the keywords you care about there's only

58:17so much more upside you're going to get from your more paid spend other than just like the economics on that paid spend so I think that being keyword aware is very important I think this goes to a kind of broader strategy though is that I think any app needs to have some leverage in user acquisition I've talked about this a lot and we're talking about it through these two specific lenses ASO and paid spend I do think there's maybe 10 other potential lenses to look at it through Al rails being a really famous example it's like they didn't have to rely as much on Apple search although they got featured

58:55a ton they proba did get a ton of apple search but like they had a user acquisition advantage in SEO on the web if you go search for any Trail and they're going to show up I think there are advantages you can build outside of ASO and paid spend but you need to understand what that Advantage is and what you're building toward and for a lot of apps and especially again like you said at the very beginning of the podcast if you're trying to build a new category that people aren't searching for it is a really hard uphill battle because you got to figure out something

59:30outside of the app store that's going to drive people whether it's like you know Tik Tock organic whether it's SEO whether it's you know some advantage in paid spend that you're building something unique but it is hard to go build a real business in the app store around something that people aren't searching for and I think a lot of people discount just how much some of these bigger apps benefited from like the CMS the head spaces the my fitness Pals lose it famously I mean they were at the top result for decade plus they were one of the earliest calorie counting apps and rode that ASO wave

1:00:07into this massive business that they are today I think that's discounted a lot or not kind of fully understood when you're trying to compete in that calorie counting space or other spaces the incumbents have this advantage in that search that is nearly impossible to break in 2024 so like what can you bring to the space and leverage in user acquisition outside of ASO or paid if that's going to be really hard to compete in or do you have some advantage in paid because ASO is going to be really tough to crack in these bigger categories agree with all that I think so we treated things like content and

1:00:47SEO as organic in our view so like ASO was kind of one leg of the organic stool but totally agree you can get real user acquisition through other like so content was definitely one that worked for us our best example was for robok killer we were the biggest app in the space and in the US so therefore we had a lot of data on spam calls and texts in the US and we started publishing reports and working with reporters to basically help them report on the issue to say here's how many spam calls Americans are getting every month here's how it's growing we worked with the FCC and the

1:01:19FTC to get them data too because they didn't have great data and all of this so we found that we had this proprietary data set people were interested in talking about it and it wasn't a direct we talked to this reporter and we're going to get a bunch of users but like when you start accumulating multiple Wall Street Journal articles that reference you and like multiple Financial Times articles that reference you and you're getting placements on cable news and things like that that starts building a brand and organic Halo and you could absolutely Drive significant user acquisition through that so we saw a lot of success

1:01:47with that to the extent you can replicate it like definitely do that and then Community is another one that I think could be very impactful if you can build a community I think it's really hard but I think it can be very impactful and I think maybe not the most traditional sense of it like dual lingo I think that was a big part of their early growth was they made it largely free it was very gamified it became this thing that you talked about you were doing you did it visibly on like the subway to work people saw you doing it and they created this like real brand

1:02:16awareness by building a very large community of unmonetized users and then they figured out the monetization in a much more meaningful way on the other side of that so I do think what you think about breakout stories I actually think the most common Trend between them is they have found some very meaningful channel of organic acquisition outside of App Store search and that's really what's helped them break through that ceiling we were talking about before yeah yeah totally makes sense so I kind of took us down multiple R holes but back to like brass's tactics on how to think about customer acquisition costs what are the

1:02:51specific things you're looking at there so we talked about kind of Blended and paid CAC but then what are some of the the formulas and other things you look at there I think it's important to look at look look at it across your funnel there's a couple different like intersection points you could think about things like generally what we see is you are thinking about a cost per install a cost per free trial or cost per subscriber I would pick one of those as your primary metric and that should tie to your monetization strategy so for example if you're a free app that's mostly advertising driven you probably

1:03:23want to think about a CPI um because you don't have a free trial or subscribers so therefore those aren't relevant metrics to you if you don't use free trials cost per free trial isn't super relevant but if you just go into direct subscriptions think about that if you use free trials it may benefit you to think about a cost per free trial because that's a more Dynamic quicker metric you don't have to wait seven days for them to convert out of the free trial to figure out what your cost per subscriber is so just think about it on a cost per trial basis obviously you have to make sure that your LTV matches

1:03:50whatever you're using as the denominator for your cost but I think about like where in the funnel do you want to measure your acquisition cost is important and like I said then you think about it as paid and Blended and then even within paid think about Channel specific acquisition costs so understanding is meta more expensive than Google or Tik Tok for example and then understanding where can you pull levers and increase your spend on the other side of those and then I think more broadly tactically where a lot of paid spend has trended in the mobile space is large like blackbox algorithms if you think of Google and meta are the

1:04:23two biggest platforms for able to spend on ASA as well but like both Google and meta basically set a bid in a budget and like that's the degree of control you have over those platforms so what becomes a huge lever and I'm certainly not the first person to say this is creative is a very big lever and you need to be really focused on it and so a couple things we say there is like always be testing creatives you should always have some like if you think about the creatives in your campaign and those different structures or how you do this but like there should be some percent

1:04:52that are experimental that are unproven and you're just always putting new ones out there to see what resonates and then two one tactical tip I give people a lot is rotate designers on your project what you often unsurprisingly like everyone has no matter what your profession is like your own distinct style certain Engineers have a certain way that they like code things and like the way their mind works Finance Guy background my financial models had a very consistent like theme and flow to them in terms of like how my brain worked and how that translated into a model all designers a pretty like unique and personal like

1:05:28theme are the things that they like to lean into and if you keep using the same designer what you find is like you get in this trap of incremental improvements where what you're really doing is you're changing 5% or 10% of a thing to see if it works a little bit better and sometimes it's actually better is to bring in a new designer and just be like hey like this is the product go wild with it like obviously you got have brand guidelines around it and it's got to be relatively consistent but like actually try something wholesale new and see how how that performs so we tried to

1:05:58get in a rotation of we'd actually for our creative teams rotate them across products so you'd work on this product for a couple months and then you'd rotate to another product for a couple of months and that way got us more diversity of the types of creatives that were flowing through there and then so we could pick the winners out and start understanding okay well like this style is resonating let's do more of that style as opposed to the style almost being like a fixed thing because it's just the designer style now this is a huge can of worms and we do need to wrap up so I'll ask for the top tips and the

1:06:31uh two to three minute answer but you got to ride the wave of ATT at mosaic so we've been talking CAC and measuring your paid spend the question people will be shouting back is like okay cool those those calculations are great but like any top tips on on actually putting pen to paper and measuring these things or or keyboard to spreadsheet as it were how do you actually meaningfully measure both paid spend return and organic return the quickest answer is run multiple analyses and look at the aggregate of those analyses so like the way I I think about in the postat world is like you still have mmps

1:07:14they're still going to give you some degree of a breakdown of your acquisition by channels take that at face value understand what that says then also do a blended analysis and say like what does my Blended look like am I still okay with Blended similarly just do like paid vers organic and say there maybe some mixup between channels so on a holistic paid basis with the MMP is telling me do I feel good about that and start like aggregating across those I don't think anyone can rely on like One Singular dashboard I yearn for the days of preat where I had like a looker report that I fully trusted and like I

1:07:45just knew that like this specific Geo campaign on Google was doing this but like that those days are gone and like you have to accept that they're gone in my view at least so you do that and then also think about like operationally how and when you launch and or scale things so what I mean by that is like if you say okay we don't do any paid spend now and we going to launch on Google meta and Tik Tok don't do all three at once just launch on Google and then understand okay like all we've changed is we're now spending on Google what's the impact of that get

1:08:15Google to a steady state and then say okay now I'm going to launch on meta and now you're you have a new Baseline and all you've done is change one thing if you launch all three at once it's going to be very hard to understand and the relative performance of each and like what's going on there so always think about Inc like doing things very incrementally and same thing if you already launched and you want to start changing bids and budgets change like one bid give it a month see what happens then change another bid and you have to give yourself time to establish baselines so that you can do that like

1:08:45incrementality analysis of I made a change and now what am I seeing in my aggregate numbers as a result of that yeah that's super helpful and probably the most helpful thing is for folks to just hear it's hard yeah it's hard like you're always kind of guessing and at the end of the day like I ground myself in Blended performance which is like because like that's your p&l is inherently a blended mix of everything you're doing and so like and at the end of the day your p&l is what has to make sense what has to work so like that should be your North Star and like your

1:09:14grounding light of does the Blended make sense and if the answer is no like you got to go figure that out and then as long as the Blended is making sense then attempt to better understand the D under there but like always be grounded in the Blended has to make sense yeah well I think it's a a great place to wrap up I know people would be hoping for a magic answer I feel like I get asked this all the time like how do I measure like which MMP do I use and and the answer is like it's just hard and everybody's got to figure it out tell Apple to reverse

1:09:47their change well I've been pushing hard on uh improving scan I think Apple well what is it called now I don't even remember the new acronym for it but uh I don't think Apple even has to reverse at to get back to better they just need to better incentivize the industry to use whatever it is now not ski network but whatever it is we could get to a much better place on on reporting if if they would provide the tools and and be a little less precious about an anonymity because like at scale some tiny amount of potential for user data leaking like the way they built their tools is is

1:10:25very Ivory Tower like like zero personal data can leak that's just not how the real world works because if data on two or five users is potentially able to be de anonymized at scale that's not it doesn't matter like nobody's going to bother deaning those handful of users when there's millions of data points flowing through the system I'm still hopeful I mean obviously Apple's never going to put the at Genie back in the model so my hope is is actually that they just continue iterating on those tools to make it better and more deterministic over time by improving those systems which I think there's tons ahead room for them to do they've just

1:11:09been very slow to do it it's also a great opportunity for the marketing channels themselves to start differentiating like I here recently meta is starting to pull away in terms of relative performance because they've invested a lot more in how to operate in an post at world and so I think what you could start seeing is some marketing platforms invest more in that than others and that's where more of the dollar start flowing to all right well this has been so much fun but as we're wrapping up anything you wanted to share I know you're working on some new projects and anything you wanted to share about those

1:11:41yeah I've started a new Venture it's called the app shop it's myself and some old colleagues from the Mosaic group the gist of what we're doing is taking all of our lessons and experiences and and learnings from all of those years building Mosaic and offering up to other companies playing in the space we love the mobile app ecosystem we want to see it grow we're largely doing consulting and agency Services can help with marketing monetization and product development if anyone's interested we we'd love for you to reach out our website's the app shop.io awesome well Patrick thanks so much for joining me it was so much fun thank

1:12:14you thanks so much for listening if you have a minute please leave a review in your favorite podcast player you can also stop by chat. sub club.com to to join our private community [Music]