What is the Customer Acquisition Cost?
The customer acquisition cost (CAC) is a monetary metric that sets the overall cost of a campaign in relation to the number of users who spent money on an app or an in-app purchase. In other words, it tells marketers how much money they have to invest in ads on average to gain one new paying user.
CAC = Campaign Cost / Paying User
Another name for the same KPI is cost per paying user (CPPU).
To download a premium app, every user has to pay. Thus, every user is a paying user, and the CAC equals the CPI.
The CAC is the counterpart of the ARPPU. By comparing these two metrics, app marketers can judge their efforts to acquire paying users. If the ARPPU is bigger than the CAC, these efforts are profitable. In contrast, if the ARPPU is lower than the CAC, the measures are not profitable.
The reasons for the discrepancy and non-profitable marketing can be:
- the acquisition cost for new users is too high
- the conversion (user to paying user) is too low