Why Marketers Should Be Measuring Cost-Per-Action
There is a fundamental problem in the way mobile app advertising is bought today. The vast majority of mobile marketers buy app installs ads on a cost-per-install (CPI) basis and focus their campaigns on one primary goal: getting the most installs at the lowest cost. This is understandable, given that CPI is an easy metric to understand, track and optimize against. It enables most marketers to work with the data most readily available to them, such as impressions, installs, and cost per install.
However, when a marketer wants to drive actual mobile engagement in their app, measuring and optimizing against the cost-per-install just isn’t relevant. In fact, a VentureBeat study that covered 230 developers, 9,000 apps and 397 million monthly active users found that “cost-per-install is the worst mobile user acquisition method.” A majority of the users you gain from the volume-based approach have a very low lifetime value.
Clearly, it is time for a change. The more important metric to measure and optimize is the cost-per-action (CPA) — the cost to acquire a user who engages in a high value, revenue-producing, post-install event.
Although marketers prioritize mobile engagement differently depending on the purpose of the app, at its core, CPA measures engagement. For example, social networking apps focus on acquiring users who will create a profile and share content, while travel apps are more concerned with finding users who will make a reservation. Retailers care most about driving purchases, and subscription-based services, like dating apps, focus on attracting users who are happy to pay a monthly fee. The cost of these post-install events varies widely, from just under $10 for a new registered user to over $200 for a new paid subscriber. However, the cost is secondary to the lifetime-value of the user after they have gotten to the engagement level of completing an action within the app. Most marketers will eagerly pay more for a highly qualified user who has already taken that action within the app, so they can use other methodology to keep them engaged and gain repeat actions.