When it comes to in-app advertising costs, there’s a lot to keep track of. The alphabet of acronyms alone can be dizzying, and that’s in addition to staying on top of emerging pricing trends.
In this article, we cover:
We’ve compiled everything you need to know about the most common ad pricing models, as well as the key details you need to decide whether or not they’re the right choice to achieve your marketing goals.
To understand the cost of in-app advertising, marketers must first understand the larger world of mobile advertising. Mobile advertising is a subset of mobile marketing that’s been found to be 30% more effective than traditional internet ads. It delivers targeted ad content specifically designed for tablets and smartphones and comes in a variety of formats like rewarded video, static interstitials, and playables.
According to a report from MetrixLab, “mobile now represents a majority of digital media consumption,” with time spent on these devices outpacing the daily screen time given to computers. Considering that nearly 80% of Americans owned smartphones as of early 2018, mobile advertising should be at the forefront of any marketing campaign strategy.
There are a few key types of mobile advertising commonly used today. One of the most effective modes of mobile advertising is in-app ads, which are deployed directly within an active app interface. Since users spend roughly 89% of their browsing time running apps, it’s the core advertising channel for mobile marketers looking to reach new customers. Audiences tend to engage with in-app ads more than alternative formats, and revenue is expected to reach $7 billion by 2020.
There are also mobile web ads. Much like the traditional desktop format, mobile web ads are deployed on websites being viewed specifically by mobile devices. The key difference is mobile versions are optimized for smartphone and tablet viewing instead of a computer monitor. Mobile web pages tend to receive far fewer views than apps and shouldn’t be prioritized, but studies do suggest that engagement rates can be comparable to in-app equivalents.
Native ads are another type of in-app advertising offered by companies like Twitter, Facebook, Reddit, and look just like the surrounding content in which they appear. They take some skill to execute, as they must match their environment in design and tone, but they’re a good way to garner attention without being intrusive.
While it may not always be realistic for smaller companies, programmatic advertising can automate the process of buying, selling, and deploying ads without manual human approvals, making them an effective way to manage ad inventory through a single interface.
While there’s no one recipe for a successful mobile ad, there are a few best practices that can increase your odds of making an impact, especially when it comes to video ads. First of all, keep it brief. Timing is everything, so don’t interrupt the user in the middle of an activity to blast your message! Instead, find a natural pause in the activity, like between levels in a mobile game. Also, don’t invest too heavily in mobile practices that are becoming outdated — like banner ads, for example. Instead, make sure you deliver a targeted experience catered to the user.
Want to learn more about mobile advertising fundamentals? Check out our full blog post, “What Is Mobile Advertising?” for more helpful details.
Now that you know the basics, let’s take a closer look at some of the most popular pricing models used in the modern digital advertising ecosystem, starting with a favorite of mobile app marketers.
Short for “cost per install,” CPI marketing is a pricing model in which marketers only pay when their app actually gets installed by the user. A common type of in-app advertising cost, CPI is calculated by dividing ad spend by the total number of app installs generated by the associated campaign. This provides you with a baseline cost to acquire a single user.
CPI marketing campaigns use a pricing model built around install efficiency. Under this model, advertisers only pay for users that install the app after seeing an ad promoting it. Since CPI campaigns only charge advertisers for confirmed installs, marketers only pay for real users, and are able to protect their budgets.
Individual CPIs vary wildly depending on the country they’re sourced from. The general rule of thumb is that established, wealthy economies like China or the United States demand higher rates while emerging economies like Brazil or India have lower ones. Similarly, Android and iOS apps generate contrasting CPIs. Many studies have found that worldwide, Apple users are willing to spend more on IAPs than Google users, which equates to a higher average CPI.
Each media source will also offer a different rate for deploying CPI campaigns. Social media platforms tend to have the highest rates for their visibility, while other networks vary cost by services offered. Keep this in mind when budgeting — where are you most likely to attract a meaningful audience?
Another thing to consider is that the specific category and genre of your app can dramatically influence the overall CPI. For example, mobile games tend to have a higher CPI than other app categories, while certain gaming genres like casino games can demand above-average CPIs as well. To get the highest returns from CPI ads, some strategies that should be considered are targeting key audiences, optimizing and scaling your campaign, and analyzing other metrics that indicate engaged users.
For more information about cost per install marketing, check out our full post “What is CPI Marketing?”
Cost per view advertising is another pricing model that helps advertisers mitigate risks and budget more strategically. It’s a particularly popular pricing model for video ads, as it ensures advertisers don’t pay unless their videos are actually watched.
Of course, what qualifies as a “view” varies depending on the source. Google defines a view as 30 seconds (or the duration of the video, if the ad is shorter than half a minute). Twitter’s view duration is much shorter: about “two seconds of play time with at least 50 percent of the video on the screen,” according to Ad Age. No matter how long you consider a view, measuring success (and price) by views provides an immediate look into how ads are performing, what tactics are working, and what areas need attention.
There are a variety of reasons that marketing pros are using CPV marketing, but a big one is this, per Ad Age: “Performance advertisers are able to obtain high-quality users by paying for just a view in front of premium traffic, giving them a competitive advantage when battling for inventory.”
For more detailed information on CPV marketing, read our blog post, “What is CPV Marketing?”.
In the same vein as CPV marketing, CPCV — cost per completed view — is another way for marketers to ensure that their ads are actually being noticed. CPCV ads actually go one step further; instead of just requiring a view, it takes a completed view in order for the impression to count.
Why the distinction? Well, the IAB and Media Ratings Council define a mobile video ad as viewable if at least half of the ad is displayed on the screen for a minimum of one second, but on paper, that’s not very much quality interaction time. Many advertisers are no longer willing to pay for ads that run for such a brief period of time, hence the rise of the CPCV pricing model.
CPCV advertising enables the advertiser to only pay for a video ad once the user has finished watching the entire video. Like with CPV marketing, there are different definitions of what constitutes a completed view, but Tapjoy considers a completed view to be just that — a video that is watched all the way to completion, regardless of length.
Unfortunately, not all publishers are on board with this newer form of advertising. Because average video completion rates on mobile are just 64%, some don’t offer CPCV pricing. The reason why Tapjoy is able to offer CPCV advertising is that our rewarded advertising model provides a balanced exchange of value between the advertiser, publisher, and consumer. As Tapjoy’s Steve Wadsworth wrote about last year in AdExchanger, the industry is moving towards a CPCV model because it addresses many of the transparency, accountability and performance issues that affect the market.
To learn more about the power of CPCV marketing, read our full blog post, “What is CPCV Advertising?”
Advertisers calculate Cost Per Engagement by dividing the total amount spent by the number of measured engagements. Like other pricing models that require a definitive action, it’s a lower-risk way to ensure that your ad spend is producing results. There are only two end results, both beneficial in their own ways. If a user engages with the ad, you’ve succeeded! If they don’t, you can retool your campaign without additional payments.
There are many types of engagement, but here are a few of the most popular examples:
It’s up to the advertiser to figure out how they want users to engage with their ads and set that definition. There is one thing that app marketers generally agree on, though — the engagement must be the result of some high-quality action. Where CPI and CPV campaigns are specific about the required action, CPE ads are constantly finding new ways to engage users. This gives advertisers the freedom to define what counts as engagement on their own terms, it easier to adapt to new advertising trends and mediums quickly. The increased creative output allowed by this flexibility, as well as smarter budgeting options and stronger engagement levels, are just some of the benefits of CPE advertising.
CPE campaigns are often delivered to audiences via value-exchange advertising formats like offerwalls. The mobile gaming space, in particular, is home to some of the most successful CPE campaigns ever run. There are plenty of mediums besides mobile games where CPE ads work well — they’re also rising on social media. Games are just a natural environment for cost per engagement campaigns because they can easily provide players with digital rewards in return for engagement, increasing the odds of interaction.
Want to learn more about cost per engagement advertising? Check out our full post on the topic, “What Is Cost Per Engagement Advertising?”
For CPA advertising, performance marketers only pay for ads that lead to actions or sales outside of the app itself. That makes it an ideal model for advertisers, because it transfers much of the responsibility for campaign performance onto publishers. To find the Cost Per Action of any campaign, simply divide the total ad spend by total attributed conversions.
Here are some examples of CPA advertising in action:
It’s easy to confuse the Cost Per Engagement model with the Cost Per Action model, which causes confusion among traffic providers using the terms interchangeably. Yet while the approaches are similar, CPA goes further by ensuring user interactions are successful with the completion of desired events. To differentiate these models, Tapjoy uses the following definitions:
CPA campaigns are particularly effective in the mobile games space. In gaming, these apps provide organic opportunities to provide players with digital rewards in exchange for actions. As with CPE campaigns, CPA ads also drive high performance on social media platforms.
Want to learn more about cost per action advertising? Check out our full post, “CPA Advertising — What Advertisers Need to Know.”