CPA: Is It The New CPI?

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Partner Post - Addict Mobile - Stop buying downloads: Buy profitability

Posted: April 18, 2016

Mobile Marketers are accustomed to measuring their mobile acquisition campaign’s cost-efficiency and performance by using the CPI, Cost Per Install, or the cost of a new user. More than a simple indicator of cost-efficiency, the CPI is a good gauge of the monetization potential of a given application, following the logic of the app install.
But is the CPI really the best indicator of a mobile acquisition campaign’s performance and cost-efficiency? Let’s take a closer look.
The CPI may vary according to the following five criteria:

  • the operating system (Android or iOS);
  • the user’s geolocation;
  • the type of app;
  • the media channel used (Facebook, Google Adwords, Ad Networks…);
  • the media format (video, banners, interstitials, offer walls…).

Different CPIs on iOS versus Android
There is a significant difference between the CPI on iOS versus the CPI on Android. On iOS, the CPI is generally higher. In 2015, the CPI was calculated to an average of $1.24 on Apple, versus $0.53 on Android. There is a simple explanation: there are more Android devices than there are iOS devices (notably in densely populated countries like China or India). This phenomenon is also due to the base cost of these devices and, by extension, user demographics. Apple users tend to be economically elite, have higher incomes, and consume more, namely on in-app purchases. They are therefore the preferred target for advertisers, which in turn drives market prices.
The CPI varies depending on the country
The CPI also varies from one country to the next. According to a study conducted by Chartboost, the average CPI ranges from $3.23 in Australia to $1.91 in France (a study based on gaming). As is to be expected, this variation can be explained by the standards of living in each country, and hence by higher or lower mobile phone use in a given region. As a reminder, CPIs are very high in Australia, as well as in Norway, Sweden, and Switzerland, which are nations with higher purchasing power parity, and as such considered as more mature mobile markets, with higher CPIs. Similar to the differences between iOS and Android, advertisers make efforts to capture this type of market, which directly translates into higher market prices.
The CPI depends on the acquisition source
The CPI tends to vary a lot depending on the acquisition channel. On Facebook, the CPI rises from one quarter to the next. The reason? Facebook is being increasingly exploited for mobile marketing campaigns because it’s a source that offers a wide, high-quality and qualified public. As an advertising platform, Facebook generally offers high visibility opportunities.
Like Facebook, Twitter has relatively high CPIs: the platform has a very segmented user base. Finally, the numerous Networks offer businesses ample opportunities to build extensive acquisition campaigns: less powerful targeting, but also lower CPIs.
The average gaming CPI tends to be higher
Lastly, here is a category of app that promotes considerable impact on CPI. One can draw an easy distinction between games and other types of applications (media, services, utilities…). Users generally tend to spend more in the mobile gaming sector: about 70% of app store revenues (on iOS and Android combined) come from gaming. Historically, games have always shown higher CPIs with respect to other categories of apps, the gaming market being extremely competitive.
In parallel to these three categories, other factors may impact CPI:

  • Competition: CPI will be higher in a highly competitive sector/country;
  • Download volumes: the more you try to drive the number of installs, the more you must raise the CPI to improve your market position;
  • The target of your campaign: when an application is first launched, there are always early users interested in the application, and thus they are more engaged. Afterwards, users are harder to acquire through acquisition campaigns because they are less attracted to the app. So, logically, the CPI will increase.
  • Some markets follow very specific rules. This is true of the Asian market: the acquisition channels and traffic sources are very different there.

Thus there are many external factors that have an impact on CPI.
It is not enough to keep your acquisitions cost low in order to run a cost-efficient acquisition campaign. You must put your CPI in perspective with your most stringent KPIs, allowing you to measure user loyalty, engagement, and value. Only in this way are you able to calculate the actual ROI of your acquisition campaign.
In reality, the CPI must always be set against the LVT, Life Time Value, per user. This variable allows you to measure users’ value over the long term, throughout the life span of your app.
In order to develop long-term profitability, it is necessary to establish a strategy that balances targeting new users and re-engaging dormant users. Having collected the user data for a given app, you can segment your user base and create a user hierarchy you wish to reach through re-engagement/retargeting campaigns.
Optimization is a very important stage in a ROI-based approach: designing A/B testing, daily analysis of results, KPIs, and so on. Finally, you mustn’t forget to develop re-engagement strategies: What message do you want to communicate and to what audience? How do you choose your media channels and the frequency of impression? What is the projected profitability of your campaign?
The choice of engagement
The level of engagement depends on a combination of several KPIs, without a magic formula: conversion rate, interactions with the app, opt-ins, opt-outs…
Nevertheless, an essential KPI is user loyalty (NB: a loyal user is one who has opened the app more than three times). The KPI used in the industry is retention, that is to say, the number of users who come back to the app over one, seven, and/or thirty days (or more).
The CPA: the new CPI?
We are witnessing the birth of a new, powerful indicator in terms of mobile acquisitions, namely the CPA, or Cost Per Action. In fact, CPA pools together the tracking of user actions within an app once it has been downloaded, installed, and opened. The actions may include: registration, push subscription, number of clicks within the app, the number of “pages” accessed, as well as in-app purchases.
To recap, a low CPI is not a goal in itself but an indispensable stage in the process of monetization. CPI is certainly useful in gauging campaign efficiency, but it mustn’t be the only indicator used to manage and optimize your acquisition campaigns. Indeed, every advertiser sets the objective they want to track based on their own business model. You must therefore be able to understand and interpret the CPI in context, as well as in light of your specific objectives and specific KPIs for each acquisition campaign and app.
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