Ads in Apps 101. Part 3. KPIs for Advertisers

In part 1 of the series we’ve covered some reasons to monetize your mobile apps and games with ads and in part 2 we’ve talked about the types of ads and ad providers as well as the very basic terms used in the industry.

In this part I want to concentrate on the key performance indicators advertisers care about when they run campaigns in your apps and games. Why is this important to you? Well, it is always valuable to understand what are the goals of your direct or, in this case mostly indirect, customers. Additionally it is very likely that you’ll find yourself on the other side of the equation once in a while during your app publishing career.

So let’s begin with the simplest things and go down the road to more elaborate and meaningful metrics.

Click-through Rate (CTR)

It isn’t easy to measure if/when your player actually looked at the advertiser’s ad, but very easy to know when they clicked on it. So a click-through is the very first and basic result of an ad campaign. And CTR is the metric telling you what percentage of the ad impressions result in an actual click.

What is a good CTR? Well, from our experience the average worldwide CTR on in-app banners is around 1% and for interstitials it’s somewhere in 5-10% range. Obviously a lot of factors can influence the specific CTR for your campaign. Your creatives and your targeting are the primary influencers for the click-through rates your campaign gets.

How do you improve CTR? Unless you are paying for clicks (CPC), your goal is to increase the CTR as much as you can. Obviously creating a very luring but absolutely misleading creative can backfire on your credibility, but other than that, whatever makes the user want to tap on your ad is generally great.

Having said that, clicks are almost never your end goal, so CTR is primarily a KPI for figuring out the most attractive ad copy.

Install Rate (IR)

While getting a lot of clicks is great, it doesn’t give your app’s ad campaign much, if no one installs the app after clicking on the ad. This is what IR is here to measure – percentage of clicks resulting in an app installation. This is one of the metrics that is not very easy to measure, but there’s a number of companies providing 3rd party (read unbiased) conversion attribution tracking.

What is a good IR? I’ve seen a lot of numbers, but my understanding is that around 10% is normal for a free mass market title (or a well targeted campaign).

How do you improve IR? Provided that the user has already clicked on your ad and ended up on your store listing page, the listing’s copy, your screenshots and reviews are the main factors affecting your install rate. Your goal is to close the deal with a clear and attractive store listing.

One thing to note, though, is that the more specific your ad leading to the click was, the more logical it is to expect an install to happen (meaning higher IR). However very clear message ads are not necessarily attracting the most clicks and it’s easier to close the deal when you can present more information in the store, than to fit it all in an ad. The key is to find the right balance.

Cost per Install (CPI)

If you are an app/game advertiser one of the first actually meaningful results for you is app installation.

What is a good CPI? Again this depends on a lot of factors like platform, country, genre/category etc. but a ballpark number is somewhere from around $1 to $4-5 or even more.

How do you improve CPI? In this case improving your cost per install means lowering it and to do that you improve a combination of your CTR and IR. If you manage to improve at least one of them without sacrificing the other your CPI will go down.

Obviously if you aren’t paying for your campaign on a CPI basis the quality of the network your ads go to affects the CPI a lot. Finding the best source of installs is mostly a trial & error process. One network can work great for one type of apps in one region and be totally worthless in some other case.

Return on Investment (ROI)

At the end of the day the only thing that you care about is how much you make from each dollar invested in advertising. Sometimes direct returns are not an objective for you at the current stage. You may be doing a push up the app store charts or doing something else that is not directly linked to monetary returns.

But when you do advertise to acquire new users whom you plan to monetize then the basic formula is pretty simple – you want to buy users cheaper than their lifetime value (LCV). In a very simplified form you know an average revenue from your users and you compare that to the price you pay to acquire them. In reality a lot of other variables come into play. Things like virality (how many “organic” users does one “bought” user bring via word-of-mouth) and quality of a particular user cohort (not all the users were born equal) can affect ROI of a particular user acquisition campaign dramatically.

How do you improve ROI? In theory it’s very simple – acquire better users cheaper and improve their LCV. Improving LCV is outside the scope of this series and acquiring better users cheaper is basically an exercise in trial & error. You can obviously rely on recommendations from your colleagues in the industry, but it’s quite common that what works for one person doesn’t work for the other and vice versa.

In the next part we will look at the other side of spectrum – KPIs that you as a developer monetizing with ads should care about.

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