Mobile advertising is complex. Anagrams like CPC, CPI, and CPM will befuddle developers new to monetizing with ads, and can even stump veteran mobile advertisers.
But we’ll help you differentiate and understand these mobile advertising models, and you’ll be able to identify the ad spend model that’s ideal for your mobile app advertising budget.
Contents
1. What is CPC, CPI, CPM?
---- 1.1. Cost-per-mille (CPM)
---- 1.2. Cost-per-click (CPC)
---- 1.3. Cost-per-install (CPI)
2. CPI, CPC, CPM Pros and Cons
---- 2.1. CPI
-------- 2.1.1. Cost-per-install pros
-------- 2.1.2. Cost-per-install cons
---- 2.2. CPC
-------- 2.2.1. Cost-per-click pros
-------- 2.2.2. Cost-per-click cons
---- 2.3. CPM
-------- 2.3.1. Cost-per-mille pros
-------- 2.3.2. Cost-per-mille cons
What is CPC, CPI, CPM?
There are different strategies for purchasing mobile advertising campaigns geared to accommodate an advertiser’s budget. The basic mobile advertising models boil down to cost-per-install, cost-per-click, and cost-per-mille. These are just the basic payment models that advertisers can select to promote their products or companies on mobile.
But being that the mobile advertising industry is slightly more complicated than appearances, identifying the best spending strategy might not be as clear as day. So while you might be inclined to make your advertising decisions based on what a fellow developers has told you, take it from an ad network that deciphers mobile advertising for a living. We’ll take a look at the pros and cons of advertising in each format so that you’ll have a better understanding of the best advertising models for your user acquisition or branding campaign.
Cost-Per-Mille (CPM)
If you’ve ever heard of the phrase, “paying for impressions,” CPM is the advertising model that’s being referred to. CPM is directly translated as “cost-per-mille” in Latin, or “cost per thousand” in contemporary English. In a CPM campaign, an advertiser pays the agreed bid price for every 1,000 times that an ad is displayed on the mobile device. CPM advertisers, because they’re paying for impressions and not for clicks and installs, tend to be used by brands that prioritize brand awareness over conversions.
Cost-Per-Click (CPC)
Advertisers pay per click with a cost-per-click campaign. CPC among performance advertisers might not be the most popular campaign model for obvious reasons – after all, why pay for clicks when you can pay for direct downloads? But CPC has its advantages if you’re examining both user quality and behavioral analysis, which we’ll get into later.
Cost-Per-Install (CPI)
Cost-per-install (CPI), or also known as cost-per-acquisition, is a popular mobile advertising payment model used by app developers. Its popularity stems from CPI requiring that developers only pay every time that a user downloads their advertised app. With this in mind, CPI campaigns tend to give medium and small companies with limited marketing budgets the best bang for their advertising buck.
On the other hand, cost-per-click and cost-per-mille won’t necessarily guarantee that a user will install the advertised app even if you’re paying for the impressions or clicks to display the ads, which makes these models a riskier investment. However as great as CPI sounds, there are a number of disadvantages associated with the CPI model, which we’ll get into later.
CPI, CPC, CPM Pros and Cons
While it’s easy to say that performance advertisers should exclusively advertise using a CPI model, and brands, using CPM, these wouldn’t necessarily be accurate statements. In fact, each type of mobile advertising model has its benefits and flaws, but we’ll help sort out the advantages and disadvantages.
Cost-per-install Pros
The obvious benefit to advertising with a CPI campaign is the cost. Looking at bid prices alone, CPI bids are generally higher than CPC and CPM, but paying per install on average leads to a lower total campaign ad spend than running CPC or CPM. With developers only spending on a per user acquisition basis, which minimizes the risk of overspending on traffic that doesn’t convert into downloads, many developers opt for this performance advertising model.
Cost-per-install Cons
Limited control over traffic - However, despite the savings, you get what you pay for. Working with non-transparent ad networks, advertisers will find that it’s difficult to control the quality of the traffic that your ads are being shown to. And, because mobile ad networks are incentivized to drive a high number of installs – don’t forget that ad networks collect revenue per-install – many networks will funnel a high volume of cheap, low quality traffic to CPI advertisers. AppFlood however stresses not only transparency, but also empowers advertisers with a tool that can shut off access to low quality of traffic with the flick of a switch.
Limited user behavior tracking - With this emphasis on ad networks increasing download numbers, at the expense of user-quality, it’s not until the advertisers conduct a user-quality analysis like the long-term value of users (after the ad campaign is over) that they’re able to analyze the quality of users acquired. Since CPI campaigns are only able to identify information on the types of users that have downloaded the app, the model isn’t conducive to identifying the “why” in why viewers clicked on an ad but didn’t end up converting further down the funnel. Unfortunately most performance mobile ad networks aren’t motivated to display behavior-level metrics like time spent, bounce rates, browsers, and other details to performance advertisers.
Mobile ad optimization isn’t a priority - Performance advertisers are generally mid-sized companies or small studios with a few headcount and limited marketing budgets. Not surprisingly, they’re concerned more with achieving hard quantitative KPIs that can be tracked easier than behavioral data acquired from click data in CPC campaigns. With that in mind, advertisers typically won’t make the designing of their ad creatives a priority, knowing that in a CPI campaign, it’s not worth investing in the optimization of creatives.
Cost-per-click Pros
This might surprise you but when comparing performance, CPC can be better than CPI for acquiring users – that is if your company is able to shoulder the higher cost of CPC campaigns.
CPC is more insightful than CPI - Data-oriented advertisers gravitate to CPC, and prefer to understand why it is or isn’t that ads are being clicked on. Of course, to track this type of data you’ll either have a robust in-house team – which is usually the case in larger companies that base decisions on data like Amazon; you’ll hire an agency, which can run six figures, if not seven; or you’ll work closely with a third-party analytics firm, while analyzing your own data and making tweaks to your target demographic. Despite the cost, the trove of data advertisers have access to provides valuable insights into who does and doesn't click on your ad, based on details including browser types, languages, IP addresses, time spent, among other metrics.
CPC can be cheaper than CPI - In fact, because in a CPC campaign advertisers or the agency they’ve hired will try to maximizing conversions (and get bang for their buck, they’ll spend the time to optimize their ad creative in an effort to improve conversion rates, which can effectively be a cheaper model looking at a per-acquisition basis for advertisers if optimized correctly. However small and mid-sized companies tend to neither have the resources nor the manpower to invest into campaign optimization.
Cost-per-click Cons
While more insightful data-wise, CPC’s advantages are also its own downfall. Advertisers that don’t have the resources to maximize clicks into conversions by analyzing clicks and optimizing the ad creative, will generally spend more on a CPC campaign than CPI campaign. Consequently, many studios with limited resources will opt for CPI.
Cost-per-mille Pros
Embraced by brand advertisers, CPM traditionally has been identified as a brand building advertising payment model regardless of the campaign showing on the Web, TV, or mobile. CPM on mobile, for the most part, is no different.
CPM, rich media, video go hand-in-hand - If a mobile ad network offers CPM, you'll that these networks offer rich media and video. AppFlood for instance offers rich media and video in conjunction with CPM. Why? There’s flexibility with rich media ads that’s advantageous over traditional banner ads or even panel and list mobile ad formats. Animations, video, and dynamic interactive ads encourage a higher level of visual engagement from viewers.
Control over mobile ad creatives - CPC is to brand advertisers as CPI is to developers. But for more traditional brands whose primary concern is brand awareness and performance is just an afterthought, they’ll maintain full creative control over their ads and make sure to maximize brand impact even if the brand is working with an agency.
Customized events & behavioral data - Data from customized rich media ads - beyond clicks – can be captured more accurately than by using any other mobile payment model, and ad format for that matter. As a result, CPM is naturally the best payment model for this campaign since the advertiser is more concerned with maximizing the brand awareness of impressions than generating clicks back to their website. For instance, by using the interactivity of rich media ads, a brand’s mobile ad might request that a viewer select their favorite soft drink flavor. Based on this ad, the soft drink advertiser might be able to analyze user sentiment about their drink flavors.
Cost-per-mille Cons
We’ll point out the obvious. CPM isn’t a performance-based advertising model and any developer or brand looking to acquire mobile users will outspend on CPM than any CPC or CPI campaign. Disregarding the obvious, there is one other “disadvantage” that CPM advertisers should keep in mind.
Think of this as a warning. Due to the nature of CPM campaigns - the fact that you’re paying exclusively for impressions - there’s a chance that an ad network will provide you with low quality impressions or even a low fill rate. For example, an ad network might consider displaying your ad in a pop-up banner ad that pops up for one second and promptly disappears. Or your ad creatives might simply fail to load. If this is the case, then no matter how much you’re spending, you’re probably never going to maximize the impact of your mobile ad creative.
To avoid getting stiffed, brands should inquire with the ad network directly to identify how the advertiser’s ads will be displayed in the publisher’s apps. Ad networks like AppFlood will work closely with the brand advertiser to set parameters for displaying their ad creative, including the location of the mobile ad, the ad type, and mobile ad duration so that the advertiser is able to maximize their CPM campaign dollars.
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