CPI: The criteria that impact its value – Emphasis on the correlation between CPM and broadcasting country –
When it comes to application and acquisition strategy, the key market indicator is never far away: that is to say the CPI, or cost per installation. In this article, we explain the parameters that influence its final value in order to provide some context to the observed market data.
CPI: the market benchmarkFor the entire industry, the CPI is the reference KPI since it allows to gauge the cost of a user. However, the CPI is not an end in itself since an application business cannot rely solely on this KPI. Other parameters are essential: UX, monetization, customer retention, content, to name but a few. However, the CPI remains the most important element for application publishers since it allows them to benchmark themselves against the competition. They can thus assess the viability of a business model. In addition, almost no application is able to make a living from its organic traffic. Media investment, translated into figures by the CPI, can then become a success or a failure (also called a “make or break”) for a publisher. CPI is the result of three ratios:
- CPM: the cost per mille or cost per thousand, which is the the cost of displaying 1,000 ads;
- CTR: the Click Through Rate, which represents the number of users who click on the ad in relation to the number of impressions;
- CVR: the Conversion Rate, i. e. the number of users who install an application after clicking on an ad.
CPI per tierOur study focused on the CPI according to countries gathered by tier. In tier 1 – comprised of the most developed countries such as Australia, the United States, France, Canada and Great Britain –, the highest CPIs are observed. While in countries such as Argentina, Chile, Greece, Indonesia or Thailand – which are in the third tier –, the CPI is 3.5 times lower than the tier 1. Acquisition costs are very low for two main reasons:
- The purchasing power of the users is smaller;
- Monetization of these users is lower.
CPI per countryTo go a little further in our study, we have chosen to focus on specific countries, namely those that have generated at least 100,000 installations for Addict Mobile. They are classified by CPI (see graph 2). Three country groups stand out. Group 1: India, Philippines, Brazil (tiers 3,4 and 5) Although these three countries have low CPIs, they offer enormous potential for two main reasons:
- Their strong commitment in apps;
- Their large population allows for a significant reach.
The CPI relies on the CPMIt is important to remember that the CPM (cost for 1000 impressions), which corresponds to the price of the media space, has a direct impact on the final CPI and many people ignore it when launching mobile acquisition campaigns. The CPM is the key market indicator that depends on the country, the broadcasting OS, competition, seasonality, target audience, etc. It is therefore necessary to know how to use it to control these costs. We can observe here the impact of the broadcasting country on the CPM and ultimately on the CPI. Indeed, the more attractive a country is, the more the CPM will increase as demand in this market is strong. The famous law of supply and demand. Advertisers are looking for the most “profitable” users – those who live in countries with high purchasing power –, which increases competition and therefore the final CPI. This trend is confirmed by chart 3. We observe that the CPMs and CPIs are correlated in each tier.
Case study: the gaming sectorThe gaming sector has truly been the pioneer in terms of acquisition. It is a very interesting sector to analyse because it is one of the few that allows an application to be distributed worldwide: few localization constraints and no product delivery, specific regulation or absence of the brand on the market. Based on this assessment, it is therefore possible to have a global vision on the CPIs. The aim is to observe a trend between markets in order to better compare them and not decide on the value of the CPI as such. An observation that can be replicated to any other vertical. Chart 4 illustrates perfectly the correlation between the CPM and the CPI, which is global in all countries. It must be noted that the results observed here are similar to the previous observations. We can therefore conclude that the acquisition market is regulated by the media space purchase price. In addition, thanks to Addict Mobile’s expertise, we know that although CPIs are strong in the United States, Australia and Switzerland, these countries remain the most profitable for most mobile games. Once again, advertisers will seek the user value (ARPU) regardless of the CPI. The market regulates itself in a way: we are willing to spend more for a user if they have more value. In the light of this information, two issues emerge:
- The CPI Optimization. The advertiser is not powerless in the face of the close link that binds the CPM to the CPI. The work on targeting, designs, audiences or bidding allows to optimize the intermediate transformation rates (click rate and conversion rate at install) and in the end the CPI. This allows you to get the most out of your acquisition campaigns, and therefore optimize your profitability. This is the spearhead of Addict Mobile, whose expertise at this level allows it to bring real added value to its customers.
- The CPI is not equal to performance. It is important to always relate your CPI to its final objective (i.e. retention, in-app purchase, subscription, ROAS, etc.) in order to get closer to the most profitable audiences – whether they are expensive or not. It is indeed essential to remember that a quality user has a cost, but it is also often the same user who provides the best profitability.
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