I’m currently working on launching an iOS app and am ready to start promoting it. Like any new project, my ultimate goal is to build a profitable business. But instead of diving headfirst into spending, I want to ensure that the numbers work in my favor before scaling up. This post is a breakdown of my thought process, early experiments, and what I’ve learned so far about setting targets for a sustainable app business.
Why PPC Is My Starting Point
When it comes to marketing a new app, there are plenty of options: social media, influencer collaborations, SEO, and more. However, I’ve decided to focus on Pay-Per-Click (PPC) advertising as my starting point. Why?
- Control: With PPC, I can tightly control who sees my ads, how much I spend, and how I scale campaigns.
- Immediate Feedback: PPC delivers quick results. I can start gathering data right away to see what’s working and what isn’t.
- Scalability: If the ads are profitable, I can reinvest and scale up.
But to make PPC work, I need to fully understand the metrics that will make or break this business.
Baseline PPC Numbers From My First Test
I’ve already run a small test campaign to establish some baseline numbers. While I’m still optimizing the ads, targeting, and messaging, here’s what I’ve learned:
- Cost-Per-Click (CPC): The CPC on my first ads ranged between £0.22 and £0.45, depending on the audience segment.
- Conversion Rate: I don’t have reliable conversion data yet because the app is still pending approval on the App Store. However, I’m assuming a 5% conversion rate as a starting point for analysis. (This is optimistic but achievable with good ad creatives and landing page optimization.)
What Metrics Should I Be Targeting?
To make this business work, I need to focus on a few key variables:
- Price Per Sale
- CPC
- Conversion Rate
- Apple’s Cut: Apple takes 30% of every app sale, which significantly impacts profitability.
Profitability Analysis: Can This Work?
Cost Per Acquisition (CPA):
CPA = CPC / Conversion Rate
For example, if CPC = £0.30 and the conversion rate = 5%:
CPA = £0.30 / 0.05 = £6
Net Revenue After Apple’s Cut:
Apple takes 30% of the app sale price. For example:
- At £9: £9 × 0.7 = £6.30
- At £12: £12 × 0.7 = £8.40
- At £15: £15 × 0.7 = £10.50
Profit Per Sale:
Profit Per Sale = Net Revenue - CPA
If CPA = £6 and the app price is £9:
Profit Per Sale = £6.30 - £6 = £0.30
Sales and Traffic Requirements for £100,000 Profit:
Sales Required = Profit Goal / Profit Per Sale
Traffic Required = Sales / Conversion Rate
At a £15 price point with a 5% conversion rate:
- Profit per sale = £10.50 – £6 = £4.50
- Sales required for £100,000 profit = 100,000 / 4.50 = 22,223
- Traffic required = 22,223 / 0.05 = 444,460
Key Insights From My Analysis
It seems like I need to get a £12 price point with a conversion rate of 4% or more and a CPC of below £0.30 to really make this business work. Which will be hard but, not impossible. Here are a few tables I played about with that got me here…
- Conversion Rate Is Critical: If the conversion rate falls below 3%, this business is unlikely to be profitable. Even at a 5% conversion rate, I need to ensure my CPC stays below £0.30 to make the numbers work.
- Higher Price Points Are Better: A price of £15 allows me to reduce the sales volume and traffic requirements compared to £9 or £12 pricing. However, this requires positioning the app as high-value to justify the cost.
- Apple’s Cut Hurts Margins: The 30% fee significantly impacts profitability. Factoring this in early has been eye-opening, as it increases the importance of keeping acquisition costs low.
- PPC Alone Isn’t Enough: While PPC is a great starting point, I’ll also need organic traffic from platforms like TikTok, Instagram Reels, and YouTube Shorts to reduce dependency on paid ads.
Next Steps
Here’s what I plan to do next:
- Optimize Ads and Targeting: Refine ad creatives and audience targeting to lower my CPC.
- Prepare for App Store Approval: Ensure the app’s landing page and App Store listing are fully optimized for conversions.
- Scale Carefully: Start with a small budget, measure ROI, and reinvest profits to scale.
- Test Price Points: Run A/B tests to see how different price points affect conversion rates and overall profitability.
Why This Analysis Matters
This type of detailed profitability analysis has been invaluable in helping me set realistic expectations and targets for my app. It’s easy to get caught up in the excitement of launching and scaling, but without clear metrics, it’s just as easy to spend money without seeing a return.
If you’re building a product or service, I highly recommend taking the time to run the numbers. Even basic models like these can provide clarity and confidence in your decisions.
Closing Thoughts
Launching a business is exciting, but it’s also a numbers game. By starting with PPC and diving into profitability analysis, I’ve gained a much clearer picture of what it will take to make my app a success. Whether or not this exact strategy works, the lessons from this process will guide me in every project I tackle moving forward.