Measuring the effectiveness of your mobile advertising campaign

The key benefit of digital advertising, in comparison to any other medium [particularly TV, Radio, PR & Billboard] is accountability. You can see where your money has been spent and how effective it has been in meeting your business objectives.

The online advertising industry has developed sophisticated tools to understand how your advertising budget delivers against everything from awareness, perception, trial, usage and purchase. However it continues to surprise us how rarely these tools are used in measuring the effectiveness of mobile advertising and how the only form of measurement continues to be the cost of advertising itself.

Furthermore we see advertisers time-shifting campaigns (i.e. starting and stopping campaigns so they do not overlap thus enabling the panner to measure campaign effectiveness by matching peaks and troughs of downloads against campaign traffic).

It has surprised us so much we felt it necessary to explain how we think you should measure the effectiveness your mobile advertising has on your app (BTW - for the purposes of this blog we have assumed you installed tracking software).

The following table provides a list of metrics we think you should use based on what type of app you have:

CPD (Cost Per Download)

Cost per Download provides you with a simple comparison metric between advertising channels. You divide the advertising budget per channel by the number of downloads you have achieved within a particular time frame to provide you with an average cost per download by advertising channel.

We recommend you do not use this in isolation (particular if your user is required to register for the product after they have downloaded it).

CPR (Cost Per Registration)

Cost per Registration provides you with a similar metric to CPD but goes one step further to help you understand the cost per registered user. This is useful given there is often a 25% + fall out rate from download to registration. You divide the advertising budget per channel by the number of users that have registered within a particular time frame.

Download to Registration %

The provides you with the % of users that go onto register after they have downloaded your app. You divide the number of registered users by the number of downloads within a particular time frame.

This metric shows you the quality of user each advertising channel is providing you with.

30, 60, 90, 180 day ARPU

This provides you average revenues over a time frame  by advertising channel. It enables you to assess how valuable an advertising channel is by the sales it yields over time (a particular favourite of ours).

30, 60, 90 day transaction volume

This metric provides you with transaction volumes over time by advertising channel. This sits nicely alongside the ARPU KPI as it gives your planner insight into sales activity by advertising channel rather than value.

Day 1 ARPU:

We have found there is  a correlation between in-app purchases made on day 1 and what they continue to do over the preceding 3 - 6 months. The more a user purchases on Day 1 the higher propensity they have to purchase on an on-going basis. Thus calculating DAY 1 ARPU can provide a planner with valuable, immediate and actionable data.

No. of Day 1 Sales Transactions:

This provides you with the number of transactions undertaken by advertising channel on a particular day of the campaign. It sits side-by-side with Day 1 ARPU but provides a view on sales activity rather than value (which can be useful if you have multiple price points).

Economic Return

This provides you with a KPI that measures the financial return (represented by a %) against your advertising budget. You tend to measure 1 day, 7 day and 30 day economic return for each advertising channel.

LTV (Lifetime Value)

This metric is the lifeblood of many subscription services as ultimately LTV needs to be higher than Net CPA of the business is unprofitable.

A review of the “State of Mobile Advertising 2011” Report by Mobile Marketeer

Giselle Tsirulnik from Mobile Marketer describes the mobile advertising industry as being in ‘rude health’. Giselle’s comments form part of the introduction to a great report published this week called ‘Classic Guide – State of Mobile Advertising 2011’. In this weeks blog we extract the pertinent points from this report. (The full report can be downloaded from here: http://www.mobilemarketer.com/cms/opinion/classic-guides/10125.html)

This comprehensive report makes great reading as it pinpoints some of the key reasons for growth in the sector. It also provides valuable information about what ‘is’ and ‘is not’ working in the mobile ad space. In this Blog we list the growth Drivers that were presented and pick up stats we can we can all use in our business cases and presentations! In our next Blog we will focus on what is working and not working.

Reasons for Growth:

The continued growth of the mobile advertising sector is down to a number of  factors:

Growth Factor 1: Phenomenal growth in smart-phone penetration across the World.

At the height of the dot com boom there were approximately 350 million connected PC’s. The number of smart-phones in circulation surpassed that figure last year and continues to rise steeply with more smart-phones shipped globally in the final quarter of 2010 than PC’s. Add to that the fact that most smart-phones today boast better connectivity than those PC’s of 11 years ago and you can see why the media world is waking up to the possibilities. Where the eyeballs go the money will follow!

Growth Factor 2: New entrants to mobile.

As the Mobile Marketer report references; ‘DotMobi’s 2008 study showed 150,000 mobile-ready Web sites, while the 2010 study showed approximately 3.01 million sites, representing an incredible two-year growth of 2,000%’. The report goes on to compare this stat with the growth of desktop Web properties between 1996 and 1998. The launch of desktop web sites grew 1,300% over the same time period back then. These figures are impressive but we mustn’t forget that developers have also churned out and launched over 500,000 apps in a three-year period! Both these factors combine to power an explosion in the number of page impressions available for advertising.

Growth Factor 3: Its Easier for the Consumer

As an industry we have taken great steps to de-mystify the consumer proposition. Pricing is easier to understand, access and usability of apps and the mobile web is much improved and this has now been tried and tested by millions of users.  Furthermore, the cost of data has come down over the past few years with either unlimited or simple to understand tariffs.  Operators have embraced mobile data services as an important part of their future business. By way of example Vodafone announced earlier this year that data revenues have surpassed the revenues generated by SMS. Surfing the mobile net, playing with apps is becoming second nature (as well as consuming the promotional messages that sit within them).

Growth Factor 4: Validation from the big guns

When Google acquired Admob and Apple launched iAd it signaled serious intent in the space from two of the influential players within the digital economy.

Growth Factor 5: Advertiser acceptance

The final piece of the jigsaw, of course, is the advertiser. As the mobile channel matures we are seeing the introduction of new innovative ad formats and increased measurability. The case studies (well most of them) make good reading and this is all pushing the advertising community to take the channel more seriously. Brands now know that mobile will attract the eyeballs and they also know that mobile can deliver exceptional results when planned and executed in the right way.

Stats for the business cases and presentations:

Here are just a few headline stats from the Mobile Marketer report:

• Mobile app downloads to increase from 10.9 billion to 76.9 billiin in 2014 according to International Data Corps.

• eMarketer estimates the US mobile ad market to rise from $743.1m in 2010 to $2.5 billion in 2014.

• eMarketer predicts that the mobile display is set to rise from $202.5m in 2010 to $887.6m in 2014.

• Mobile search is set to generate $295.1m in 2011 vs $83.2m in 2009 and $185m in 2010 according to eMarketer.

• Finally eMarketer expect spend on video advertising to reach $201.3m in 2014 rising from $28.3m in 2010.



Mobile Advertising Pricing Explained

There are many pricing methods used within the industry and which one is applied often depends on what ad format is being sold. However, more often than not, regardless of the underlying calculation method and the ad format, the cost of advertising will packaged as a “CPC of £0.50” or ‘a CPM of £5.00”.

 This post helps you understand the meaning of these terms as well as a few comments on the pros and cons of both.

 CPM Explained:

• CPM is an acronym for Cost per-thousand-impressions (remember an impression is the display / broadcast of one advert to your prospect).

• The original term is ‘Cost Per Mille’ (‘Mille’ being the Latin for a thousand) hence the M in the acronym.

• “A CPM of £5” means you pay £5 for the display / broadcast of your advert 1000 times and in this example each ad will cost you £0.005 (£5 / 1000)

• Pricing on a CPM basis is most often the reserve of premium inventory , i.e. ad space that is known to perform well and as a result is in high demand.

• It is also used when an ad space owner has just launched their advertising offering  to the market and is testing the water on whether they can justifiably charge on a CPM basis.

• When advertising is priced on a CPM basis, the purchaser of the advertising is taking the risk because regardless of advertising performance (i.e. a click through to a landing page or some of form of success metric) you still pay for the amount of ads served.

• Finally, buying on a CPM basis has the added advantage of guaranteeing that your order will be served within the time frame stated on your Insertion Order (which is useful for ensuring the timelines of your media plan are met). Quite simply the ad server will believe your order is one of the most profitable for the ad space owner and will in turn will give you priority and the desired share of voice.

CPC Explained:

• CPC is an acronym for Cost-per-Click (i.e. a click through from the advert to your destination page).

• A “CPC of £0.50” means you pay this amount every time a user clicks through to the URL you have issued to the ad space owner.

• Whilst CPC pricing is often the domain of blind networks / Run-of-Site packages, a deal can often be picked up near month end / quarter end when the ad space owner is looking to get as much ad cash on the books. Do not be afraid to ask!

• On a CPC basis the ad space owner is taking the risk as they are completely reliant on the attractiveness of your advert (and consequently your product and service) to attract a click through from an interested prospect.

• In contrast to the CPM model your ads are often de-prioritised as the effective cost per ad is lower than other advertisers who have bought through the CPM model. To counter this, more often than not, a bid system will be in place, so you can raise the CPC bid price if you feel your throughput is insufficient to meet your media plan objectives.

Whilst a majority of customers say to us “ we want CPC priced advertising only” there are serious limitations to this approach. Read our blog: “Comparing CPM apples with CPC pears” to understand this more and learn how to compare pricing models on a like for like basis for media planning purposes.