iPhone and iTouch Apps

Before getting too excited about iPhone apps, it's important to look at the potential ROI.

Reach-
How many people have an iPhone or iTouch? Recent reports say 13MM iPhones and 18MM iTouches have been sold. If 35MM devices are in the market, how many users fit your target audience? And for the offline retailer, how many users in your target market are in your trade area?

Consumer Engagement-
Let's say a retailer has locations in the top 10 DMA's and 80% of iPhone or iTouch devices are used in these markets and keeping things simple, iPhone and iTouch user's are spread evenly across each market with 2.8 million devices are used in each market. Of the 2.8 million iPhone or iTouch users per market, how many are likely to download your app? 0.1%? That's 2,800 downloads per market. I would estimate that about 2,800 visits would occur each month (50% of users will access the app twice per month.)

Cost-
Depending on the scope of the app and who creates it, the cost will vary. For most retailers, I'm guessing an agency would be used to create the app and it would cost between $45,000 and $90,000 to develop with monthly maintenance costs of $5,000 to $10,000.

Cost per Engagement (CPE)-
Amortizing the initial costs to create the app over 12 months, your looking at a monthly cost of $8,750 to $17,500. Based on 2,800 uses per month per market, the CPE of this particular example would be $3.13 to $6.25. How does this CPE compare to other media used to engage your target audience?

ROI-
To determine ROI, you'll need to bring conversion into the equation. How many uses of the app did it take before the user purchased your product or service, and what is the profit on that sale? Was the profit on the sale greater than the total CPE?