The MobileBeat conference brings hundreds of VCs, developers, and publishers to San Francisco for two days of spirited debate.

Yesterday I moderated a panel with some of the most knowledgable people in the mobile and casual business space: Paul Baldwin, CMO of Outfit 7; David Bluhm, CEO of z2Live; Mike Breslin, veep of marketing at Glu Mobile; and Anil Dharni, co-founder of Funzio.

Entitled "What is the Right Cost of a User?", it debated how much a company should spend for acquiring and keeping an app user.

Focus on the upsell

Baldwin from Outfit 7 said that despite having had over 100 million downloads, his company spends zero money on advertising or getting new customers.

Instead, maker of the Talking Tom Cat interactive animal series, Outfit 7 uses word of mouth, aggressive freemium models, and solid cross-selling to keep its coffers full.

Indeed, Baldwin revealed that the original Talking Tom Cat app still has millions of active users, while the average customer has three different Outfit 7 animal apps. Using this information, Outfit 7 can promote its giraffe or dinosaur app within the cat app.

The road has been much more complex for Glu Mobile which, at the start of 2010, went from a premium paid model to freemium games. The switch is all about getting new customers. “Free gets them, but a good user experience keeps them there,” explained Breslin. 

Don’t waste money on Android

When it came to Android, the panel agreed that it's still, at best, a marketing tool and, at worst, a financial black hole for acquiring users.

The problems, Bluhm explained, are virtually endless: device fragmentation requires dumbing down apps or creating multiple SKUs; the multiple app stores don’t allow complete compatibility from, say, Amazon to all Android devices; the "open" market increases the chances of black market or bootleg games, and so on.

Bluhm and Dharni both said they watch their Android app adoption rates carefully – and the numbers pale in comparison to their iOS adoption rates.

However Baldwin argued that Android can still be a great platform for publishers looking to create a name for themselves: in other words, creating additional branding.

Even a behemoth such as EA Mobile it released its big IP Scrabble free this week on Android. The only other free version is on Facebook.

Quality up, payment micro

Behind the popular game Crime City, Dharni of Funzio is currently guiding his company from its Facebook casual success to the mobile platforms, thanks to a $20 million funding round. 

He believes the platforms are more alike than not, with the most successful developers depending on microtransactions instead of big retail prices.

In fact, all the panelists agreed innovations like the tablet and Apple Airplay are just bringing bigger graphics and a bigger audience, but the market will never command pricing comparable to your average home console game.

Instead, the freemium model will continue to be the driving force for years to come.

“My monthly phone bill is usually between $800 - $900,” Bluhm said,  regarding microtransactions. “I think consumers will get used to paying for media that way, and, hopefully, that’ll start to feel like the norm.”