ailon's DevBlog: Development related stuff in my life

CPA, CPC, CPI… it’s all a big lie

8/21/2013 5:29:00 PM

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It’s an advertiser driven market out there. Meaning that there’s more ad space on the web and in mobile than there are ads to fill it. And what were advertisers always dreaming of? They only want to pay for results. So when someone advertises a product they want to pay only when someone buys it. If you have an app, you only want to pay for the downloads. A service? Pay for subscribers. And so on and so forth. Worst case acceptable scenario – pay for clicks. At least they’ve acted on my ad! We finally have a way to track these things. I’d argue that we tend to give that tracking thing too much credit, but that’s another story.

But if you look at the other side of the fence, publishers, ad networks, developers never think in CPC or CPI. They always think in CPM. Even if they have to agree to sell you on the CPI basis, they will always measure their own results in effective CPM. And even if they agree to your CPI rate on the first run, they will look at what eCPM it brings them and react accordingly.

What does it mean for you as an advertiser? Any reasonably smart bidding-based system (AdWords, Facebook, etc., etc.) doesn’t rank your campaign ads based on your CPC bid, but rather on the resulting eCPM. And “human-based” systems are pretty much the same. So, if your CPA campaign results in poor eCPM, they will either raise your rates or just refuse to continue dealing with you (in case you are beyond saving threshold). On the other hand, if the publisher is happy, it most likely means that you are overpaying for the service. Even when they are desperate and don’t kick you out despite poor performance of your campaign, it’s likely you’d get an even better rate on the CPM basis.

So what I’m getting at? Any product has a minimum reasonable price. In this case the product is ad space and the price is measured in CPM whether you want it or not. So the only way for you to control the destiny and the price of your campaign is to buy it on the CPM basis too. In this case it will be you who evaluates the effectiveness of an advertising platform. Yes, it may cost you more for the test run, but after that you know your metrics. You may find out that you are paying a lower CPA than you were planning too. And even if results aren’t satisfactory, you can negotiate better rate in terms that are clear to the other side. Or you can just decide that this is not the right platform for you and focus your precious time and energy on those that work.

In any case, buying on the CPM basis you control your advertising, buying on the CPA you only control your advertising expenses.

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