5 key metrics that help edtech startups improve profitability

While some experts expect a second honeymoon period for edtech, founders in the space need to change their tactics and learn how to get more results with less money.

If you have a good product, a great marketing team and a stellar sales team, it makes sense to expect that you’ll earn a lot. Unfortunately, the reality is that these things don’t help much at all.

As soon as you figure out what makes each of your strategies “effective” or “good,” you’ll succeed. It is important to learn how to break down your tactics to improve revenue.

Direct ways to improve revenue

Address sales department effectiveness

Analyzing metrics begins with determining each manager’s target results. Since a person can only do so much, it is important to know how much time and effort everyone is putting in daily.

It’s important to assess your sales department’s workloads to see if anyone is getting too much or too little work. Often, a sales manager may be assigned too many leads, but this can be detrimental to their effectiveness. Overloaded sales managers cannot communicate with clients efficiently, which negatively affects the overall return on marketing investment.

You can calculate “normal” workloads based on your product and take steps to avoid assigning new leads to overloaded sales managers until their workload has normalized.

The service-level agreement (SLA) of each lead

SLAs can be used as an indicator of how quickly sales managers respond to incoming requests. Our data indicates that elapsed time directly correlates to conversion rates.

Managers should call customers back within 5-20 minutes. Conversion rates can decline by 20% to 30% if callback times are between 30 minutes and an hour. A manager who calls back customers after an hour reduces their conversion rate by half.

Create a simple dashboard to track SLA per day and see if your team is overloaded or does not have not enough leads.

Approval rate of bank deferrals and students loans

5 key metrics that help edtech startups improve profitability by Ram Iyer originally published on TechCrunch

Edtech reacquaints itself with fintech

Amy Jenkins left her post at Outschool, a marketplace for live online classes for kids, when the company decided to focus more on consumers and less on the enterprise — a shift that included numerous rounds of layoffs at the richly backed education unicorn.

Now, Jenkins is the COO of Meadow, a platform that aims to make it easier for college students to pay tuition and for universities to stay compliant with financial transparency requirements. Meadow recently announced that it raised $3.5 million in venture funding — a round that Jenkins said, to her surprise, came together pretty quickly over six weeks. Plus, the round was three times the size of the founding team’s original target.

Part of the startup’s win may have been in the framing of its vision beyond traditional edtech.

“I think a lot of our investors would look at us as an edtech company that is in the higher education space, and that there’s an incredible opportunity there to think about,” Jenkins said. “When students are entering college, they’re really at the beginning of their financial life. And we can support them and prepare them from the beginning.” The company’s early products help students better calculate the cost of attending college, balancing different factors like housing and financial aid.

Jenkins said that being a hybrid company, toeing the line between edtech and fintech, did help with closing investors. Many of Meadow’s investors cut checks in the fintech space, “but also consumer, and also social impact — so we were able to hit all of those themes for these investors in terms of high potential working in this fintech space but really having a consumer lens because we’re thinking so deeply about what students need.”

Meadow isn’t alone in balancing two sectors as a competitive advantage in fundraising: Once-crypto-specific companies are shifting their pitch to be more fintech-focused, and some health tech companies are leaning on well-known financial instruments as a disruptor. “Every company is a fintech company” is a common adage, but in today’s environment, the reasoning behind that shift may be more around survival and savviness than serendipity.

Edtech reacquaints itself with fintech by Natasha Mascarenhas originally published on TechCrunch

Pitch Deck Teardown: Laoshi’s $570K angel deck

Most of the pitch deck teardowns to date (here’s a handy list of the more than 30 we have published so far) have been for institutional funding rounds, typically in the millions or tens, even hundreds of millions of dollars raised.

Those are interesting to look at, of course, but I also know that many of you will be much earlier in your journey. I’ve been looking for a good example of an angel deck to share with you, and I found just that in Laoshi‘s angel deck. The company tells me it raised $570,000 at a $5 million cap for its very early-stage language-learning app, explicitly targeted at Chinese tutors and their students.

The deck ain’t fancy, and it isn’t perfect, but the company claims it was successful, so let’s take a look at what it got right — and what could’ve been improved.

We’re looking for more unique pitch decks to tear down, so if you want to submit your own, here’s how you can do that

Slides in this deck

Laoshi’s deck consists of 11 main slides and four appendix slides.

  1. Cover slide
  2. Problem slide
  3. Market slide
  4. Solution slide
  5. Competition slide
  6. Road map slide
  7. Team slide
  8. Teacher growth slide
  9. Teacher retention slide
  10.   Summary slide
  11.  “Contact us” slide
  12.  Appendices cover slide
  13.   Appendix I: Viral effect slide
  14.   Appendix II: Business model slide
  15.   Appendix III: “The ask” slide

Three things to love

The deck is sparse and simple, which is pretty refreshing — a lot of early-stage decks don’t seem to have much of a story woven into them and try to cram way too much information (that isn’t really relevant) onto the slides.

The overarching thing you have to remember for an angel deck is that your investors know they are in the business of high-risk investing. So, make clear why your company is a good bet, that you have a path to solving a real problem and acquiring a huge market and that you have the team to pull it off.

Team slide is A+

[Slide 7] A team slide should convince investors that you’re the right folks to build this company. Image Credits: Laoshi

In an early-stage company, it’s often said you need a hacker, a hustler and a hipster (H3) to build a good founding team. The hacker is the person with the technical know-how to build the first couple of versions of the product. The hustler is the person who hauls in sales and investment and understands how the market works for this company. And the hipster is a person who can put designs together so the product looks fresh and cool and is easy to use.

I’m not sure if I’m 100% on board with the H3 ethos of founding team building — it’s far more important that you have the right, deep domain knowledge and drive (often expressed as “founder-market fit”), but you also need a breadth of skills to build a good startup. I do admit H3 often is a good template to check out a team’s skill set quickly and to determine whether there are major gaps in the team.

This team slide does two things: It shows that the team is international and distributed. It is diverse and experienced. And it manages — in the box at the bottom — to show that the team has market-relevant experience. Now, I would still need a voice-over to find out:

  • How did the team meet?
  • What are each team member’s strengths and weaknesses?
  • What’s missing from the team?
  • Why can this team deliver in a way that nobody else can?
  • What is the hiring plan for the current fundraise?

But as a base-level team slide, this ticks a lot of boxes. What it doesn’t show, however, are past successes in startups, and I’d want to dig into that a bit more as well. It certainly is a much better slide than many of the previous ones we’ve covered in these teardowns — you know, the ones that basically stick a Stanford and Tesla logo underneath a picture and call it a day.

The thing you can learn from this slide as a startup is that your team slide is up there with the most important slides, and you’ve got to make it count. Use it to tell your story and to convince us your team is part of the reason to bet on you.

Good summary slide

[Slide 10] A good summary slide can be a great way to remind investors why they should be excited. Image Credits: Laoshi

A summary slide is a great way to engage investors, and I probably would have put this slide somewhere toward the beginning of the deck rather than right at the end — it really helps fix the company’s progress and stage in time. It shows that yes, this company is small and finding its feet, but it’s also making real, measurable progress.

Almost as important as the numbers themselves are which numbers the company is measuring. It shows monthly and daily active users (MAU/DAU), which are crucial metrics to see how sticky an app is. It shows the number of teachers and how long they are staying on the platform, which again speaks to stickiness and the reach the company has. It talks about active user engagement, which shows that people are using the app actively.

For perfect marks, I’d love to have seen these numbers as graphs rather than just as collated numbers. I’d also have liked to see dollar figures here. It’s great that there are 200+ paying subscribers, and that’s impressive for a pre-funding company. But even though the revenue numbers probably are very small, seeing a graph of those, too, is important. If you don’t put it on the slide, the investor will be suspicious about why and ask for it anyway — you may as well skip that conversation and give ’em what they need right off the bat.

The thing you can learn from this slide as a startup is to be deeply aware of the metrics that are going to help you build and deliver your business.

Business model front and center

[Slide 14] It’s always a good idea to show that you understand the levers in your business. Image Credits: Laoshi

Gotta say, I don’t love the dark-gray-on-light-gray design, and it’s curious to me that this is in the appendix rather than in the core deck. As an investor, I think this would be one of the more important slides. I’d love to see where the business is now, as well. For example, when the company says its TAC (tutor acquisition cost) is $50, what is it actually seeing as its TAC right now? If it assumes that each tutor has five students, how is that showing up in practice?

Having said that, these numbers are super important in your conversations with your investors; essentially, you’re showing how you are thinking about your business and your market and that you understand the levers in your business. In other words: What if every tutor had 10 students instead of five? What if every tutor cost $100 to acquire instead of $50? By plugging all of that into a model and running experiments to increase your trust in the model, you can get a long way toward building a great picture of your business in numbers.

In the rest of this teardown, we’ll take a look at three things Laoshi could have improved or done differently, along with the company’s full pitch deck!

Pitch Deck Teardown: Laoshi’s $570K angel deck by Haje Jan Kamps originally published on TechCrunch

2022 European edtech report: Smaller rounds and fewer deals, but more angel activity

During the darkest days of the pandemic, money was no object in many developed markets.

Governments, public sector organizations and many private companies moved heaven and earth to ensure public safety and adequate supply of core services. Quite clearly, spending reached unsustainable levels.

But 2022 was the year when this “spending” slowed and was instead more widely rebranded and accepted as actually being “borrowing.” This realization justified the beginning of deep cuts in public spending compared to before and during the pandemic.

Despite these cuts, which have been always slower to implement than communicate, inflation has been rampant across Europe and beyond, partially due to supply chain issues linked to the situation in Ukraine. Wages failing to rise in line with inflation as well as cuts to public services have led to a cost-of-living crisis in many markets.

These conditions are not conducive to inducing confidence for investors or founders. Edtech, and education more broadly, usually one of the more resistant sectors during times of economic crisis, has not been immune to the downturn.

Against this background, we formed our annual review of European edtech activity for 2022. For the first time since 2014, venture capital funding to European edtech startups saw a decline year-over-year, with startups raking in $1.8 billion in 2022 compared to $2.5 billion a year earlier.

The global ecosystem has been on an upward trajectory, albeit less consistently, but the declines in new investment in 2022 were steep: globally funding declined to $9.1 billion last year from $20.1 billion in 2021. This is in line with macro trends in the public markets as well as other tech sectors (both trends were highlighted in our October report with Dealroom).

Italy was the only European market to see a hike in both funding and the number of deals.

Perceived declines in funding are being felt more acutely, given that 2021 was a boom year. Optimism that the pandemic was coming to an end and that the world was reopening extended to ambitious founders and early teams. This momentum carried through to the first half of 2022 for European edtech. Indeed, as we reported in July, European edtech funding was up 40% in the first six months of last year compared to a year earlier.

But as we now know, that momentum faltered in the second half of 2022. Optimism ebbed away, and European edtech startups raised only about $400 million in the latter six months compared to $1.4 billion in the other half of the year.

That said, the sector proved more resilient in Europe than in other major regions. It’s worth pointing out that the region saw more edtech deals happening in the second half than in the first half of 2022, but they were simply smaller and more early-stage rounds at lower valuations.

Europe fared well compared to the rest of the world, though: Edtech VC funding only declined 28% in Europe, compared to a 64% fall in the U.S., a 46% contraction in India, and a 32% decline in the rest of the world.

Funding fell the least in Europe and RoW, with the steepest drop once again in China

Funding declined across markets but Europe saw a modest decline.

Funding declined across markets but Europe saw a modest decline. Image Credits: Brighteye Ventures

In Europe, we see the UK retaining the top spot in funding and deal activity. Edtech companies in the UK secured the most funding — $583 million across 81 deals, more than $200 million ahead of the next market, Germany, where startups raised $363 million across 34 deals.

France slipped from the podium as funding and deal activity fell sharply from previous years

Edtech funding in Europe by market. Image Credits: Brighteye Ventures

Edtech funding in Europe by market. Image Credits: Brighteye Ventures

Italy was one of only few European markets to see increased funding and deal number. Italy’s tech ecosystem has been growing gradually as momentum has built relatively consistently since 2010. It’s also promising to see the capital secured being spread across a range of sectors, with some of the largest rounds raised by companies in fintech, healthtech and real estate.

As for edtech, the market has been on a steep upwards trend since 2020. Though edtech in Italy had a record year in 2019, largely driven by the large round raised by Talent Garden, it’s quite promising to see the upward trend in 2022 being driven by smaller, early-stage rounds of less than $15 million.

2022 European edtech report: Smaller rounds and fewer deals, but more angel activity by Ram Iyer originally published on TechCrunch

Edtech’s honeymoon might be over, but expect a second boom

It’s obvious that periods of enormous growth won’t continue forever, but it’s still somewhat startling when they end. Edtech hasn’t been immune to the ongoing downturn, but at least the turn came at the end of a period that saw robust investment activity. Indeed, it’s very easy to forget just how far edtech has come in the past 2.5 years.

Per Dealroom and Brighteye Ventures’ paper, “The evolution of Edtech: activity in private and public markets,” there’s still hope for the sector, and edtech remains an enormous, underinvested opportunity. However, the momentum that has been building in recent years has slowed significantly as investors tighten their belts to better understand the more robust parts of the sector.

The public market pullback can largely be explained by the overall macro environment affecting tech and high-growth companies. Assessing individual cases, there is clear variation in the extent to which market caps have evolved, and there is some correlation with subsectors. Companies that appear to have more robust caps appear to be B2B SaaS companies, while MOOC-providers like Coursera and 2U have suffered significant declines. Of course, these changes are not only associated with overall macro trends and the subsector, they are inextricably linked to performance.

That said, it’s important to remember that publicly traded value represents a fraction of the overall edtech sector. The value of private companies is still growing, although at a slower pace than previous years.

Image Credits: Brighteye Ventures, Dealroom

Market consolidation continues, and IPOs are few and far between

After last year’s IPO fever, public exits have been rare thus far in 2022. Big public exits aren’t necessarily an appealing exit strategy in this climate, but M&A activity has already surpassed 2020 levels.

Bolstered by pandemic tailwinds and significant rounds raised in good times, edtech has begun to show signs of maturity in the form of major M&A activity led by the sector’s biggest names. Notably, Byju’s, edtech’s most valuable company, has bought 11 edtech startups since 2020 in an acquisition spree.

Edtech’s honeymoon might be over, but expect a second boom by Ram Iyer originally published on TechCrunch

7 investors discuss why edtech startups must go back to basics to survive

In retrospect, edtech’s spotlight feels like a fever dream. In the early innings of the pandemic, top companies turned into unicorns seemingly overnight as Zoom school became an actual reality for millions across the world, and a frenzy of check-writing seized investors.

Then, we slowly saw the spotlight focus and sharpen. The very companies building for any consumer who needed a better way to learn online began turning to stickier customers — enterprises — for more reliable sources of revenue. The companies that took their first venture capital during the craze decided to join forces with other well-capitalized competitors. And those that raised lots of cash in a short period of time have had to conduct significant rounds of layoffs due to the overhiring that followed.

We’re widening our lens, looking for more — and more diverse — investors to include in TechCrunch surveys, where we poll top professionals about trends and challenges in their industry.

If you’re an investor who’d like to participate in future surveys, fill out this form.

Which brings us to today — and tomorrow. To give TechCrunch+ readers a better understanding of what education investors are looking for today, seven leading venture capitalists in the category answered a series of questions about the sector’s future.

Here’s who we surveyed:

I’ll be honest, the diversity of the answers surprised me — ranging from how climate and workforce mobility are edtech’s next opportunities to how the departure of tourist VCs is playing out differently depending on company stages. The tone also felt balanced: Many admitted that things have changed, but opportunity continues to exist. Like everything these days, the vibe is nuanced.

Reach Capital’s Jomayra Herrera encapsulated the changing landscape well: “The deal pace has definitely slowed down in 2022 across most sectors. For context, we were closing a transaction every four days last year, and that has significantly dropped this year given the market conditions. I would say the past few years have been more of an anomaly, and we are getting back to a more sustainable pace.”

Emerge Education’s Jan Lynn-Matern, meanwhile, was quick to point out that edtech investment in Europe is growing despite the slowdown in the United States — the sector has secured $1.4 billion in Europe thus far in 2022, 40% more than a year earlier, reports say).

Investors are preparing for a time of going heads down, helping their existing portfolio companies that want to prioritize internal growth instead of raising more capital, and rethinking their metrics of success. But that’s all I’m giving away now; read the entire survey to see where investors are finding hope, what is no longer venture-backable, and what wave of edtech innovation they think we’re in today.

Ashley Bittner and Kate Ballinger, Firework Ventures

The early innings of the pandemic netted edtech massive investments of more than $10 billion in venture capital investment globally in 2020 and $20 billion in 2021. But the sector is now facing a downturn. How has this affected your edtech portfolio’s ability to grow, and how are you changing strategy?

It is important to acknowledge that this slowdown looks different from past downturns like the Great Recession. We have not seen a sharp increase in unemployment – as of May 2022, unemployment was just 3.6%, compared to 5% at the start and 10% at its peak during the 2008 recession – largely due to the tight labor market that emerged from the pandemic and the Great Resignation. We still see job openings and turnover at record highs, and many companies are not planning to cut back on hiring, let alone turn to layoffs.

These differences are reflected in the experience of our portfolio companies, many of whom sell into HR and learning and development. In fact, one of our companies had their best quarter on record in Q2.

When it comes to workforce learning, we believe companies are taking a different approach than they did in 2008. During the Great Recession, 1.5 million U.S. workers were laid off across over 8,000 mass layoff events. In an effort to further reduce spending, companies were quick to cut costs in areas like learning and development, which, at the time, were considered less essential.

We now know that decisions like these may have significantly contributed to the massive skills shortage we face today.

Over the past decade, many companies have grown to realize that investing in your workforce is essential to the success of the business – over half of companies facing skills gaps believe internal skill building is the most effective response, compared to one-third who believe hiring is the most effective.

Last year, we were price-disciplined and adhered to our investment strategy as we deployed capital, bringing many of the valuations we’re seeing today in line with our existing philosophy and expectations.

The pandemic’s spotlight on edtech led a slew of generalist investors to start looking at the sector and pouring money into it. This impacted the kinds of startups that got funding and the total capital in the market. Has edtech seen a slowing of the “tourism” from generalist founders and investors? If yes, what is the impact of a more focused sector?

We believe that category expertise is particularly important at the seed and Series A stages. Category expertise is key for an investor to identify product-market fit in the context of the nuances of the sector. We believe there is space for generalist investors to continue investing in the category at the later stages, once product-market fit has been achieved and a company shifts its focus towards scaling.

Edtech activity feels quieter. Is your deal cadence where you expected it to be one year ago? And are the pace of edtech exits today in line with your prior thinking?

Our deal cadence remains unchanged. Firework leads investments primarily at the Series A stage, a strategy that is more concentrated by design (and likely not as adversely impacted by a downturn as other models). We build relationships with founders over time, developing conviction in them, their team, and the company before investing.

This approach allowed us to avoid the investing frenzy of last year. It also means we are not feeling a slowdown in deal cadence this year. We are seeing a lot of companies looking to raise money, and have continued to spend time building relationships with impressive entrepreneurs.

How did the pandemic change your perception of what makes an interesting edtech company? How has that held up when deciding what is considered impressive versus normal growth?

The pandemic has not necessarily changed our thesis, but has accelerated many of its underlying trends. We saw millions of people move to remote work and learning overnight, opening up massive opportunities around remote and distributed training.

The economic recovery from the pandemic has been one of the most unequal in history, with a large number of women and other marginalized groups leaving the workforce altogether. This has only further emphasized the need to build solutions, in edtech and beyond, that are working to close these opportunity gaps.

As a Series A investor, we often look at companies with high growth rates. While strong growth is important, we are focused on ensuring that growth is durable over time. For example, a company could have achieved tremendous growth during the pandemic by tapping into COVID relief funds, but this source of funding may not be stable enough to sustain them for years to come.

What is no longer a venture-backable business model, in your view, in edtech?

We do not have a prediction about any one business model no longer being venture-backable. We continue to look for founders with a high capacity for growth, both personally and for their business, in exciting market opportunities.

What fraction of your companies plan to raise this year? What percent are raising extension rounds and how common is that proving in edtech?

We do not have companies raising extensions of their previous rounds, but we have heard from many founders who are. This move toward extension rounds illustrates a level-setting of expectations from founders around fundraising in the current economic environment.

Understanding the venture context is incredibly important for founders looking to raise capital. We work closely with our portfolio companies ahead of when they are looking to raise their next round to help them understand this context (along with their specific company context), and set goals for the fundraise accordingly.

Some edtech’s unicorns have had to cut staff to deal with the looming recession and the downturn. What should edtech companies do to optimize their runway for the next couple of years?

Despite creaky markets, European edtech is showing its resilience

These are turbulent times. Given the circumstances, it’s hardly surprising that public markets are creaking and only niche sectors remain either unaffected or in a marginally positive position. Edtech is no exception.

Today, Brighteye Ventures published its Half Year European Edtech Funding report, built around Dealroom’s data. The report primarily focuses on investment activity in Europe but is contextualized with what we are seeing in other markets.

Global VC funding into edtech startups totaled $6.5 billion in H1 2022 compared to a total of $20.1 billion raised in 2021. This pullback in global funding can partially be explained by fewer edtech mega-rounds (over $100 million) in H1 2022 compared to previous periods.

The first half of 2022 saw 16 so-called mega-rounds, compared to 24 in the second half of 2021 and 30 in the first half of 2021. At the same time, the number of early-stage rounds, categorized as deals under $15 million, has fallen fairly consistently since a peak in H1 2018.

We expect the European edtech market to maintain some positive signs of resilience, but naturally, the ecosystem cannot be immune to the headwinds it faces.

Note that this doesn’t necessarily reflect lower activity in the ecosystem — it simply means that more early deals are being done by angels and via involvement with incubators and accelerators, which are not comprehensively covered in the data.

We were pleased to see that the European edtech ecosystem has managed to maintain most of its momentum, at least for the time being. The fact that the sector has secured $1.4 billion thus far in 2022, 40% more than a year earlier, demonstrates its resilience to maintain growth even amid challenging conditions.

This isn’t surprising given the inverse correlation between worsening macro employment markets and appetite for education, particularly in the market for post-18 education.

Startup layoffs, the art of reinvention and a MasterClass in change

Just as one company’s success shouldn’t cast a halo on its vertical’s brethren, one company’s layoffs don’t quite mean that its competitors are equally screwed. Instead, I think that changes within a particular startup can be used as benchmark questions for their larger market; in other words, we can use the micro to better understand the macro.

With that in mind, I want to talk about MasterClass’ decision to lay off 20% of its staff, around 120 people, across all teams. The workforce reduction, per CEO David Rogier on Twitter, was made “to adapt to the worsening macro environment and get to self-sustainability faster.” Put differently, the company — which sells subscriptions to celebrity-taught classes — is in search of operating discipline and needs to cut staff in order to get there.

The layoffs place a spotlight on the premise behind MasterClass. When I first covered the company in March 2020, I got stuck on its pitch of aspirational learning.

[MasterClass] also touches on the public’s innate curiosity about how famous people think and work. MasterClass tugs on that idea a bit by also offering classes that fundamentally do not make sense to be “digitized.” Think high-contact sports, like a tennis lesson from Serena Williams or a basketball lesson from Steph Curry. Or just general pontifications from RuPaul on self expression and Neil deGrasse Tyson on scientific thinking and communication.

Despite its flashy lineup of stars, MasterClass doesn’t sell access but instead sells a window into someone’s work diary. Celebrities are not interacting with students on a day-to-day basis, and sometimes, not at all.

Around a year later, I returned to this idea while trying to extract what MasterClass’ prominence meant for edtech. Fiveable founder Amanda DoAmaral said at the time that MasterClass raises the bar for content quality across all of edtech, while Toucan founder Taylor Nieman pointed out that MasterClass faces the same issues “as so many other consumer products that try to steal time out of people’s very busy days.”

So what is MasterClass? A high bar for edtech quality? Or a more educational Netflix?

Use data from Q5 to boost mobile app growth for the entire year

Wondering how to improve the marketing performance of your mobile app in the spring without experimenting and extra costs? Take advantage of results from the high winter season, also known as Q5.

The tremendous amount of data received during the winter holidays can improve your marketing strategy and boost your app growth. Here’s how to extract insights that will make this approach work, enhance your ad creative strategy, transform hypotheses into proven facts, personalize your product and increase lifetime value.

What (or when) is Q5?

Q5 is a high season for marketing in the mobile app field. Though it takes place only during the winter holidays, its results equal the whole quarter in revenue. But it is not only a winter story. Q5 can be of use in the spring and summer seasons as well.

Why is Q5 data so valuable?

  • You get a more expensive audience. The business period of e-commerce ends right after Christmas, when mobile apps come into play. As e-commerce is the largest rival of mobile apps in terms of digital advertising, reduced e-commerce ads frees up the market for apps, which allows app campaigns to get more reach for less money. They also get access to a more expensive and, as a result, more affluent audience at a lower cost than usual.
  • Gain a deeper understanding of users’ behavior. Many people make resolutions at the beginning of the year to become better versions of themselves. The “New Year’s resolution” mindset makes people ready to invest in themselves. And that makes Q5 incredibly successful for fitness, health, self-growth and education apps.
  • Higher engagement rates. During the Christmas holidays, people spend more time at home and, of course, on their phones. Accordingly, app ads get more of their attention.

All these reasons help mobile apps grow in profit. For instance, the revenue of the Headway app increased 200% compared to other periods.

Chart of Headway app data from Sensor Tower.

Headway app data from Sensor Tower. Image Credits: Headway

Four ways to leverage data from Q5 right now

Improve your creative ad strategy

During Q5, you can estimate your hourly traffic more effectively to build a daily trend. Because you get much more traffic than usual, trends begin to appear. After building your daily trend, you can extrapolate it for the following periods.

For example, we noticed that our ads performed better in the morning and evening — right at commute times. We couldn’t discern this trend clearly during normal times, but a significant amount of traffic during Q5 made it crystal clear for us. So, based on this discovery, we’ve changed our creatives. Now, we tell people that they can effectively spend their downtime with our app.

Estimating traffic on an hourly basis can help identify top-performing ad creatives much faster. You will incur fewer ineffective costs when you notice them and start scaling in different variations. And as a result, you get more revenue from top performers.

When our team notices a top-performing ad, we scale it in a variety of ways. For example, changing the placement or using an image with a different ad copy. Once, we decided to experiment more and randomly rotated a bed on an ad about procrastination. The creative continued performing with the bed in a new position and was even more successful than the previous version. From that time on, we haven’t hesitated to change such tiny details, because even minor tweaks can be significant for Facebook ads on a large amount of traffic.

Image of a Headway app ad

Image Credits: Headway

Transform your hypothesis into proven facts

During Q5, marketers usually try new creatives and ad placements that they hesitated to use at other times of the year. It’s a great strategy to follow because you can check your hypothesis on a much broader audience and draw some conclusions. But don’t limit this approach only to the Q5 period. Use verified ad techniques to boost your upcoming year’s marketing strategy. But how do you apply it in practice?

Earlier, we thought that our Instagram feed was the best ad placement for us and didn’t believe that Reels would work as well. We tested this ad placement a couple of times, but it didn’t appear efficient enough. Therefore, we put it aside and decided to give it a try on a massive audience during Q5. Eventually, it worked well. With a great amount of cheaper traffic, we not only validated Reels as a successful ad placement but also created a strategy for our regular ads on Instagram Reels.

Improve marketing metrics through cheaper access to expensive audiences

Subscription model apps can increase their LTV (customer lifetime value) by getting new audiences that weren’t accessible before. How does it work?

Let’s say you usually reach users with a $15 CPM (cost per thousand). You would like to get users with a $25 CPM, but they are expensive for you. Since prices drop during Q5, these “expensive” users become “affordable.”

But why do you need more expensive users instead of reaching your good old $15 CPM users at a much lower price? Because the higher the CPM, the greater the users’ purchasing power. Therefore, users with a $25 CPM are more likely to convert to purchase than those with a $15 CPM. So, a more expensive audience has a higher potential to buy a subscription on your app after the trial and a better chance of renewing it after a month or a year.

As you get more users with greater purchasing power in your app, the LTV increases. This approach also helps you accumulate a margin of safety for subsequent less favorable periods for your app.

Now that you know your users better, personalize more

A huge amount of data from new creatives, new users and new ad techniques gives you many insights to use throughout the year after Q5. So don’t miss your chance to maximize these insights.

First, analyze and draw conclusions by observing users’ behavior during this period. How did they behave in your store, during onboarding, on the payment wall and during the trial? Is there a correlation between the creative that users came from and their behavior in the app? Second, turn these insights into an action plan to improve your product and personalize more.

This method enhanced our work: During Q5, we noticed that our ad creative about decision fatigue became one of the top performers, and many users converted to purchasers because of it. Therefore, we had two hypotheses: First, this topic is highly relevant to our users, and we have to create more content about it. Second, users like the layout of the ad creative, so we can use its visual element for the onboarding screen. We tried both hypotheses, tested them and got positive results. As a result, we use both approaches in our app.

Using these methods, you can come back to insights from Q5 throughout the year to improve your marketing strategy and your product.