For any marketing strategy featuring ads running in mobile apps, teams have a variety of mobile marketing metrics they can buy against. But which ones are capable of actually yielding a positive return on investment? Are marketing campaigns based on vanity metrics or metrics that matter for the company at large?
Over the past decade plus, the kinds of mobile app metrics that marketers buy against has evolved significantly. But, many of the current pricing models in place today could use an overhaul. Let’s dive into the current problems, and what a potential solution looks like.
Highlighting the Current World of Mobile Advertising Pricing Models
At first, all advertising on app screens was just based on media. Marketers paid just to show their ad to a set number of users. This is where the ubiquitous CPM (cost per Mille, or cost per 1,000 impressions) comes into play. Ad partners were there just to show ads. That’s it.
From there, pricing models evolved to put more onus on the user. Now, ad networks are beginning to take a little responsibility for what people are doing once they see an ad. CPC (cost per click) is perhaps the most popular user-based pricing model; another common example is CPVV (cost per video view).
One step further than both is a pricing model based on the outcome. Here, the ad network is actively invested in customer engagement and a final, desired action. In performance marketing, this concept is most commonly manifested in cost per install (CPI) campaigns. For app-centric businesses, CPI pricing has become the de facto model thus far.
Why Current Pricing Models and Metrics are Not Always Ideal
In some instances, the aforementioned metrics and models are great. For brand awareness campaigns, for example, CPM is still highly valuable and useful. But, in other instances, are other options like CPI actually indicative of an app’s success?
For example, let’s say a quick-service restaurant (QSR) wanted more delivery business, and decided that releasing its own app would be a useful way to drive more business. A CPI-based campaign would indeed be a great way to get app users, but how could they determine if those installs would later turn into active users? What is the retention rate on people who download the app thanks to paid advertising? After all, just because someone installs an app doesn’t mean they actually use it regularly.
This is why many mobile marketers are now turning to cost per action (CPA) or CPX bidding. What does the X stand for? It can stand for any metric that actually impacts the business. Here are a few examples:
- For a micro-mobility services company (think rentable e-scooters or app-based bike share providers), someone installing their app may not be all that valuable. That could just indicate that they’re a tourist in town on vacation looking for a fun way to get around. This audience is unlikely to be a loyal, repeat user. Instead, a company in this space may be more interested in basing their campaigns around cost per repeat ride (CPRR), cost per second ride (CPSR) or cost per weekday ride (CPWR).
- E-commerce firms and gaming apps alike may not see much value in someone just using their app once or twice, as that doesn’t necessarily indicate stickiness. Instead, they may see more value in driving multiple uses (opting for CPFT or cost per fifth transaction), in getting someone to sign up for a loyalty rewards program (CPR or cost per registration) or in having someone add money to a digital wallet or account (CPR, or cost per refill).
- How would a consumer bank or fintech brand know that someone is a committed user of their mobile app? Instead of just driving installs, they may be more interested in basing their mobile marketing campaigns around CPFD (cost per first deposit) or CPLD (Cost per Loan Disbursed).
- Social media companies benefit from CPX bidding as well. For these types of firms, cost per hour of usage (CPHU), for instance, would be a better indicator of stickiness than just an install would be.
Ultimately, the business is likely very interested in knowing its cost per loyal user (CPLU). Regardless of the specific metric used, CPX-based campaigns are beneficial because they tie back to material business benefits.
However, it’s important to note that some advertisers use a buying mode that is different from the bidding mode. For example, an e-commerce firm doing a three-day burst campaign to promote a big sale may prefer maximum reach for this particular effort, but pay only for conversions. So, they might bid on CPI or CPFT, but buy (or pay) on CPM.
Here’s an example that really highlights the benefits of CPX bidding compared to other models. Let’s say a rideshare app wanted to drum up more business in California. CPM bidding would ensure that everyone in the state saw their ads, no matter where specifically they lived. A campaign based on cost per first ride (CPFR), however, would help them better understand and target their audience within California; likely, it would show that people in or near major urban centers to be more frequent users of the rideshare service - and thus more valuable - than those in rural areas.
Unlike other pricing models, there is no one-size-fits-all approach to CPX bidding. What works well for one organization may be totally wrong for another. But, regardless of the specific metrics a company chooses to target, ultimately CPX bidding is often ideal because it is directly tied to concrete business results.
Is CPX bidding right for your organization? Why or why not? Let us know on social media! We’d love to hear from you on Twitter on LinkedIn.