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.
As marketers move away from measuring and optimizing purely against the cost-per-install, today’s mobile marketer needs new guidelines for how to best manage CPA-optimized mobile advertising campaigns. The Liftoff Mobile App Engagement Index, which is based on an analysis of over 22.5 million app installs and 550 million post install events, identifies trends that can help you better understand how to optimize your mobile advertising campaigns. Here are some of the key findings.
Our analysis found that while it costs less to acquire an Android user who will register and share content, iOS users are much more willing to engage in transactional events, like making a purchase, booking a hotel, or subscribing to a paid service. A marketer needs to play both platforms based on their business goals and evaluating the value of the users over time on each platform.
Gender also plays a huge role in mobile engagement. While the average cost-per-registration is similar between both genders at around $9.54, women show more interest in shopping and sharing content on mobile. Men, on the other hand, are more inclined to make travel reservations or subscribe to paid services, by a margin of 4 percent. That is valuable information to know when figuring out what audience(s) to target with what message.
In addition, each category of apps has its own behavioral benchmarks. While social apps convert a whopping 76.3 percent of installs into registered users, financial apps have a much harder time, with registration rates lower than 45 percent. This makes sense, since financial apps often need access to sensitive, personal information, like your bank accounts. For sectors like finance, with higher barriers to engagement, providing educational information and cultivating trust are key.
As competition in mobile continues to grow, so does the cost to acquire active users. As outlined above, marketers need to approach and evaluate their marketing spend based on the type of app or category they are promoting. Marketers have a wealth of data and analytics available to them, but these resources are only as valuable as what is done with them — the action taken to optimize results.
In fact, 93 percent of CMOs say that they are under more pressure to deliver measurable ROI. There is intense pressure to report on stricter ROI metrics to justify ad spend, which is why CPA models are starting to gain such momentum. This model starts to pay for itself much quicker because marketers can show that a certain action frequently results in a desired event, such as a reservation, registration, subscription, or in-app purchase. This helps the business to make smarter forecasts.
By focusing on post-install engagement and optimizing ad spend against a target cost-per-action, marketers will have greater success in building an active, revenue-producing, mobile user base.