There are many forms of mobile advertising, but not all are equally advantageous to advertisers. With more traditional ad models increasing in price while decreasing in effectiveness, marketers are turning to new strategies that take their ad spend further. One way for advertisers to minimize their own risk while hitting their ROAS goals is to use CPA campaigns. In this post, we’ll cover the following:
- What is CPA Advertising?
- What are the pros and cons of CPA advertising?
- How does CPA advertising work in real-world scenarios?
At Tapjoy, our mobile strategists work one-on-one with advertisers to help them meet their marketing goals. By utilizing modern pricing models, such as CPA, we connect advertisers with a massive, engaged audience of nearly one billion users a month, and make sure you’re getting the most out of your ad spend.
Ready to find out how CPA campaigns can benefit you? Let’s dig in!
What is CPA advertising?
CPA is short for Cost Per Action, though this acronym is sometimes used to refer to cost per acquisition. In CPA advertising, marketers only pay if and when their ads result in an action taken by a prospective customer. This model allows advertisers to choose the desired conversion point they pay for, such as a first purchase or subscription signup. Because CPA advertising ties ad spent directly to conversions instead of impressions or clicks, this model is extremely beneficial to advertisers.
Cost Per Action is calculated by dividing the total ad spend by the total attributed conversions. The result is how much you’ll pay for each individual action. CPA is similar to other forms of performance advertising in which the network publisher assumes more risk and/or responsibility, such as CPV (Cost Per View) advertising, CPCV (Cost Per Completed View) advertising, and CPE (Cost Per Engagement) advertising, to name just a few.
It can be easy to confuse CPA advertising with the Cost Per Engagement model. This confusion arises, in part, because different traffic providers define “engagements” and “actions” differently. Both terms refer to user activity that occurs as a result of an in-app ad campaign. At Tapjoy, we define engagements as events that occur as a part of an app promotion, within the advertiser app. Actions, meanwhile, are events that occur outside of an app, typically on mobile web. While the ad itself is hosted within an in-app environment, the conversion does not occur in-app. This is significant because iOS and Android platforms have different guidelines for marketers in the in-app environment. CPA ads are permitted on both platforms, while CPE ads are limited to Android devices due to the in-app conversion point. CPA is ideal for performance marketers and direct response advertisers, while CPE is well-suited to app user acquisition.
What are the pros and cons of CPA advertising?
Like any other form of advertising, Cost Per Action has its benefits, but it’s not foolproof. The most obvious benefit is the reduced risk factor. When you’re not paying for ad placement unless that ad gets a substantial result, your budget goes further. And if you’re not getting the desired results, you can reinvest that budget into different placements, demographics, creative, etc.; ultimately, negative results aren’t nearly as expensive.
The downside is that not every network or publisher allows CPA advertising models. You may have to already have proven results to be able to use Cost Per Action advertising, which isn’t helpful when you’re just starting out. The limitation is understandable, as CPA ads require publishers to give up valuable real estate with no guarantee of payment. It’s also not possible if the publisher doesn’t have the ability to share conversion data from beyond the click.
How does CPA advertising work in real-world scenarios?
Most major digital advertising solutions now offer some form of CPA advertising, including Tapjoy. Some industries are a better fit for CPA advertising than others. For example, direct-to-consumer retail, travel, and hospitality ads generate a high number of consumer actions. Meanwhile, B2B ads will drive fewer conversions and demand higher rates as a result. However, a high conversion rate isn’t the only key to an affordable CPA — high competition among advertisers can also drive rates higher. This fact increasingly compels growth marketers to explore emerging channels.
But what defines an action? Generally, this refers to something that happens outside of the app itself. One popular use case for CPA ads is growing email databases. In this case, the action would be considered complete when the user submits a lead-capture form or signs up for regular email updates. There are also a variety of e-commerce uses, where the action is easily defined as a sale, whether that sale is a physical good, event ticket, or so forth.
Here are some popular examples of CPA advertising:
- Taking a survey. Online survey data is highly sought after by companies trying to gather market intelligence. Paying for completed responses is a sure-fire way to ensure ROI.
- Providing an email address. Companies are always looking to gather valid email addresses in order to increase their email marketing reach. Consumers are often enticed with a 10% off coupon, or similar offer.
- Signing up for a free trial. Everyone loves the word free. With the right campaign optimization, advertisers can run highly profitable CPA campaigns that create a steady flow of new customers.
- Making a purchase. Whether you’re looking to lock-in a purchase or a first month’s subscription, the CPA model can ensure that your ad budget directly correlates to growth.
- Sharing content on social media. Inviting users spread the word on social channels, usually with an accompanying hashtag and/or username attached, allows buzz to spread more organically.
The value exchange model is a popular approach for Cost Per Action campaigns. Such ads are typically presented in an in-app hub called an Offerwall. An app might offer in-game currency if a user follows a link and completes a quick survey. From the user’s perspective, the short amount of time it takes to answer a few questions is a small price to pay — especially if they’re getting more coins or in-game goodies.
CPA ads are particularly effective in mobile games, but the model is effective on any number of channels. The pricing model has also gained prevalence on social media in recent years, for example. Freemium games are just a natural environment for CPA ads because they can offer digital rewards to increase the odds of interaction.
With the right partner, CPA advertising campaigns can be wildly successful. Tapjoy makes it easy for advertisers to connect with their ideal customers and foster engagement that leads to desired actions. We have a proven track record of meaningful engagement with users, and like you, we know the value of prioritizing return on ad spend. For more information, or to get started with your own CPA campaign, contact the mobile strategists at Tapjoy.