So this is how I do it. I start with 5.00 a day and .20 cents an install. If you do that every day at some point you level out on the number of DAU. Basically, the churn is equal to the number of daily users you can get for $5.00. On apps that don’t catch on it happens fairly quickly. Basically, your churn is so high that your DAU levels out in 2 or 3 days of installs. Other apps it is more difficult since the churn is so slow it takes you weeks to level out, but on these apps, you will probably turn a profit.
At that point, i look at revenue.
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If the revenue is more than the 5.00 dollars/day then I increase the daily advertisement budget but always under max daily revenue. And I evaluate the app again once the churn catches up with the installs.
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If the revenue is not more than the 5.00 dollars/day then I look at ways to increase retention or revenue. Maybe fewer interstitial ads, maybe some sort tournament or one of the many ideas floating around the web. If I can’t make it work then I either give up on the app or I bring down the advertising budget to where I was making the most ROI.
The only variation to this is when the app doubles the revenue of the advertising budget. At that point, I increase the budget of the app even if the churn has not taken over the installs.
This is what I do. With my very limited budget, I don’t have any other options. So far it has worked.