I need to make out something. Let’s say I have an app that costs 2$ on a store. Say that I create an CPI advertising campaign with 1$ bidding. Am I the only one seeing that 2$-1$ = 1$ of profit? This can’t be so easy…
Could anyone with more experience than me in advertising why this is not a good plan? Because it seems, and a pretty easy way to make money.
The price like 1$ CPI is good for free app, nobody will offer that price for app that costs 2$. To sell 2$ app you’ll need to pay 3$ or more CPI. It will be profitable only if this user likes the app and invites his friends to buy it as well, or if you get ranking boost due to downloads and more people will notice it on the play store.
The $1 CPI assumption weakens the argument here since usually CPI $X > AppPrice $Y (although the CPI here is irrelevant since when doing the maths it should be a similar case regardless whether the advertising campaign is running on CPI/CPC/CPM).
As @allagainstyou mentioned, you can still break even and become profitable with this model, if you’ve created an awesome paid app that has working viral mechanics in place.
Assuming CPI $3 and AppPrice $2, if 100 users paid and downloaded your app,
you would need every 2 users one of their friends to pay and download the app to break even (in other words a virality factor K = 0.5)
Cost $3 x 100 = $300
Revenue $2 x ( 100 + 100 * 0.5) = $300