User acquisition: how costs got out of control and what can be done about it

One of the key themes to emerge from World Telemedia Marbella was the issue of user acquisition (UA). Led by Tony Pearce from gaming company Reality+, a coterie of speakers and delegates voiced their concerns over how UA is now high cost and low return. So what can be done about it?

In the rapidly growing digital landscape, games and content companies are locked in a fierce competition to acquire new users. From mobile games to streaming platforms, the challenge lies not only in attracting users, but also in retaining them in a saturated market.

While the global digital economy presents immense opportunities, it also comes with a host of challenges: skyrocketing acquisition costs, platform saturation, privacy regulations and changing consumer behaviour.

The sheer volume of games and content platforms has exploded in recent years. As of 2024, more than 3.6 million apps are available on Google Play, while the Apple App Store boasts some 1.6 million. This creates a crowded marketplace where companies must spend heavily to stand out, especially with the increased sophistication of paid advertising algorithms that favour those with deep pockets.

Moreover, platforms such as Netflix, Disney+ and Amazon Prime Video now compete not only with each other, but also with niche streaming services like Crunchyroll (anime) and Shudder (horror) and every VAS and content provider in the telemedia community.

Similarly, mobile game studios vie against not just indie developers, but also gaming giants such as Tencent and Activision Blizzard. The intense competition inflates the cost of advertising as more brands bid for the same ad space.

THE PRICE OF TARGETING

One answer is to leverage the targeting that data and AI bring. However, sophisticated user targeting is both a blessing and a curse. While advanced algorithms on platforms like Google Ads and Meta allow for precise targeting based on user demographics, behaviours and interests, this precision comes with higher costs. Targeting highvalue users, such as those likely to make in-app purchases or subscribe to premium content, requires bidding more in competitive auctions.

The shift to digital advertising has made paid acquisition almost unavoidable. Organic reach, once a cornerstone of growth, has diminished due to platform algorithm changes.

On social media, for example, organic posts from businesses reach fewer than 5% of their followers on average. This forces companies to rely on paid media campaigns, significantly increasing their costs.

Global digital ad spending is expected to surpass $700 billion by 2024, up from $565 billion in 2022. This rapid growth has caused an inflationary effect in the ad market, further driving up user acquisition costs. Privacy regulations, such as GDPR in Europe and CCPA in California, as well as Apple’s App Tracking Transparency (ATT) framework, have limited companies’ ability to track user behaviour. This makes targeting new users harder and less efficient, increasing the cost of campaigns. After Apple introduced ATT in 2021, the cost per install for mobile games increased by up to 30%.

OTHER CHALLENGES ABOUND

Beyond the cost implications, there are several other challenges that games and content companies face in user acquisition.

The average digital consumer has an attention span of only eight seconds, making it difficult for brands to capture and retain their interest. Games and content companies must deliver compelling messaging almost instantaneously, which often requires costly high-quality creative assets and video campaigns.

App stores and distribution platforms such as Google Play, the App Store, and Steam take significant cuts of revenue — up to 30% — making it harder for companies to allocate resources to acquisition. Additionally, these platforms control discoverability, often favouring established players.

Expanding into global markets introduces the need for effective localisation. Beyond simple translation, companies must adapt their offerings to fit local cultures, preferences, and regulatory environments. For example, certain content in games may need to be censored in China, or subscription pricing may need to be adjusted for emerging markets.

The focus on acquiring new users often comes at the expense of retention strategies. Yet, research shows that acquiring a new user costs five times more than retaining an existing one. Without effective retention mechanisms, the lifetime value (LTV) of acquired users may not justify the high acquisition costs.

Modern users expect seamless experiences. A poorly optimized onboarding process, long loading times, or lack of personalization can result in high drop-off rates. For instance, mobile games with tutorials longer than 90 seconds lose up to 40% of users before they even start playing.

WHAT CAN BE DONE ABOUT IT?

While the challenges are daunting, there are several strategies that companies can adopt to tackle user acquisition issues. Companies can reduce their reliance on paid ads by focusing on organic growth strategies. This includes:

• Search engine optimization (SEO): Building content-rich websites or blogs that rank highly on search engines.

• Social media virality: Leveraging platforms like TikTok or YouTube to create shareable, entertaining content. For example, Among Us gained massive popularity in 2020 through viral YouTube and Twitch streams.

Improving retention can reduce churn and boost lifetime value. Strategies include:

• Personalised experiences: Using AI to recommend content or gameplay tailored to user preferences.

• Reward systems: Loyalty programs, daily rewards, and special events incentivize continued use.

• Feedback loops: Listening to user feedback and implementing changes promptly.

Influencers, particularly those on platforms like Twitch, YouTube, and TikTok, can provide highly targeted exposure. This is often more cost-effective than traditional paid ads. For example, Fortnite collaborated with celebrities and influencers to drive massive engagement without relying solely on traditional advertising.

Reducing friction in the onboarding process can significantly improve retention. Some best practices include:

• Shorter, engaging tutorials for games.

• Seamless payment and subscription processes for content platforms.

• Clear value propositions during sign-up.

Emerging platforms like TikTok Ads, Reddit Ads, and influencer networks often have lower costs per click (CPC) and less competition than giants like Google and Meta. For example, TikTok’s algorithm-driven content discovery can make campaigns highly effective and cost-efficient. Targeting regions with lower competition and acquisition costs can be a winning strategy. For instance, mobile gaming companies have found success in India, Southeast Asia, and Latin America, where smartphone penetration is rising rapidly. Offering regional pricing or culturally relevant content helps capture these markets.

THE FUTURE OF USER ACQUISITION

As technology evolves, so too will user acquisition strategies. Here are some trends likely to shape the future: AI-driven campaigns: Advanced AI will enable hyperpersonalized ad targeting and dynamic creative optimisation, improving ROI on ad spend. Metaverse marketing: The rise of the metaverse presents opportunities for immersive, experiential marketing. Games and content companies can use virtual worlds to host branded events, create interactive advertisements, and engage users in entirely new ways. For instance, Roblox has partnered with brands like Gucci and Nike to create virtual experiences, drawing millions of users while driving organic buzz.

Blockchain and play-to-earn models: Blockchain-based games, particularly those using play-to-earn (P2E) mechanics, offer a unique user acquisition model. By incentivizing users with cryptocurrencies or NFTs, these games attract players motivated by both entertainment and financial gain.

Axie Infinity is a prime example, having gained a massive user base in developing countries like the Philippines during the pandemic by offering income generating opportunities. Zero-party data strategies: As privacy regulations tighten, companies will increasingly rely on zero-party data—information that users willingly share in exchange for value. Interactive quizzes, surveys, or personalized experiences can help games and content companies gather data ethically while improving user acquisition targeting.

Gamification beyond gaming: Content companies can adopt gamification elements to drive engagement and acquisition. For example, Duolingo uses daily streaks, leaderboards, and rewards to keep users motivated, effectively blending entertainment and education to acquire and retain users at low costs.

WHAT DOES IT ALL MEAN?

User acquisition for games and content companies is a complex, high-stakes challenge. Rising costs, increased competition, privacy regulations, and shifting consumer behaviors make traditional methods of acquiring users less effective and more expensive. Companies must adapt by diversifying their strategies, investing in retention, and leveraging innovative approaches.

From Epic Games’ cultural crossovers to Spotify’s freemium model and Netflix’s localized content, success stories demonstrate that creativity and adaptation can overcome the barriers of user acquisition. Moving forward, emerging technologies like AI, blockchain, and the metaverse will open new doors for engagement and growth.

Ultimately, the key to sustainable success lies not just in acquiring users but in building meaningful, long-lasting relationships with them. By focusing on delivering value, creating personalized experiences, and staying ahead of industry trends, games and content companies can navigate the challenges of user acquisition and thrive in an ever-evolving digital world.

Examples of clever user acquisition strategies

Several companies have managed to overcome acquisition challenges through innovative approaches. So what is the practice of the best?

Epic Games’ Fortnite’s cross-promotion and events – Epic Games transformed Fortnite into a cultural phenomenon through cross-promotions and live events. For example:

Partnering with franchises like Star Wars and Marvel brought in fans from outside the gaming world.

Hosting in-game concerts with artists like Travis Scott and Ariana Grande attracted millions of viewers and created viral buzz.

These strategies helped Fortnite acquire users organically while reducing its reliance on traditional paid advertising.

Netflix’s global content strategy – Netflix’s user acquisition success lies in its localized content strategy. By investing in regional productions like Money Heist (Spain), Squid Game (South Korea), and Sacred Games (India), the company captured global audiences and drove organic subscriptions. This focus on cultural relevance allowed Netflix to grow in markets where American-centric content struggled.

Pokémon Go: leveraging augmented reality and nostalgia – Niantic’s Pokémon Go achieved unprecedented success by blending augmented reality with nostalgia for the Pokémon franchise. Partnerships with real-world businesses – such as sponsored PokéStops – provided additional revenue streams and localized marketing opportunities, reducing reliance on costly user acquisition campaigns.

Genshin Impact: leveraging social media and word of mouth – Chinese game developer miHoYo used an aggressive pre-launch campaign for Genshin Impact, leveraging social media and influencer partnerships. Its free-to-play model, combined with high-quality graphics and engaging gameplay, generated significant word-of-mouth buzz.

Within six months of launch, the game had earned $1 billion in revenue, largely through organic growth.

Spotify: freemium model and data-driven personalisation – Spotify’s freemium model allows users to experience the platform for free while being nudged toward premium subscriptions. Features like Discover Weekly, which uses AI to curate personalized playlists, keep users engaged and increase conversions.

This data-driven personalisation strategy ensures high retention rates, which reduces the need for constant new user acquisition.