Developing awesome mobile apps can be a lucrative business for everyone involved. But just having a great product isn’t enough to generate proper income off it. There are many factors and indicators at play and if you don’t know what you’re doing, you’re going to have a tough time trying to achieve this goal.
With that in mind, this post will try to explain in more detail one of these key indicators, called “cost per mille” or CPM and how the CPM monetization works.
What is CPM and why does it matter?
CPM or cost per mille (“mille” = “thousand” in Latin) is a pricing model that defines how much specific ad space will cost. It refers to the price paid by the advertiser to the app publisher for every 1,000 ad impressions. In other words, it is the price of a thousand views of an advertiser’s ad by the users in a publisher’s mobile app (where the ad is shown).
It is one of the most important metrics for both an advertiser and a profitable app publisher, others including CPA (cost per action), CPC (cost per click), eCPM (effective cost per mille), and more. All of these metrics are useful in their own way, with CPM being one of the best choices for campaigns oriented to delivering a particular message, increasing exposure, or spreading awareness of the brand, instead of focusing on attaining a specific user action like installation, registration for a subscription, and such.
One of the ways to observe the effectiveness of a CPM campaign is to monitor the click-through rates (CTR) or the ratio of clicks a specific ad receives in comparison to overall impressions.
To calculate the CPM, you first need to divide the cost of the campaign by the total number of impressions. Then, you multiply this result by 1,000, generating your final CPM figure. For instance, if the total cost to run a campaign is $200, and it receives 5,000 impressions, the CPM for the ad is $40.00. If the CPM is $40.00, this means that the advertiser will be charged $40.00 for every 1,000 impressions their ad receives in your app.
CPM versus other models
Another helpful metric that goes in hand with CPM (or rather, includes CPM) is the “effective cost per mille” or eCPM. It is used to measure the cost of every thousandth ad impression in a campaign whose pricing model is based on performance, regardless of the buying method.
The main difference between the two is that CPM is solely based on how much an advertiser is willing to spend on 1,000 impressions, without setting a certain performance goal (installation, registration, etc.), while eCPM focuses on measuring the cost of 1,000 ad impressions in the context of a campaign whose pricing model is based on performance.
CPA or cost per action/acquisition is another great metric that measures the cost paid for acquiring a user or having a user perform a specific action, such as the app installation or download (specifically called CPI or CPD in that case).
Using the CPA-based campaign model is ideal for those who wish to acquire interested, motivated, and valuable users (like ad whales), even in fewer numbers. It fosters high efficacy and allows for a more rational use of the campaign budget, as well as entailing low risks for both the publisher and advertiser.
That said, CPM is more suitable for publishers, while CPA is more useful to advertisers. This is because CPA earnings require that a publisher conducts a thorough quality check of the CPA traffic, which isn’t so important when paying for impressions is concerned. Moreover, the CPA model involves large financial and intellectual investments from both parties involved.
Improving your strategies to earn more from CPM
Now that you know exactly what CPM is and what its role in your app’s success is, you can tailor your CPM monetization strategies and, as a result, boost your app ad revenue and earn more money.
- Use fewer ads. While placing as many ads as possible in your app might look like an easy way to get a higher CPM, it will soon become obvious that this creates more damage than it helps. Users hate apps riddled with ads as they interfere with the content and destroy the user experience. This means fewer users and, as a result, lower revenue. Moreover, using a lower number of ad placements, like 5-7, will make your inventory look more valuable and appealing to advertisers, driving up the CPM rates.
- Choose your ad partners carefully. Be prepared to conduct some extensive research and experimentation since there are a lot of ad networks out there and they all have different offerings to choose from. Once you narrow down the list of your potential candidates, you can test them out at different ad placements inside your app.
- Compare occasionally the performance of your ad partners. Depending on their performance results, you can move them up or down, and even remove the poor-performing ones if necessary.
- Set a high price floor for the top ad network in your stack. Doing this will enable your first ad network to serve high-CPM campaigns and leave lower-tier campaigns for networks that are on the lower position inside the waterfall.
- Keep monitoring and optimizing your data. Trends and audiences are constantly changing and you’ll need to keep close attention to user retention and engagement with your app and how advertisers are performing in your app in order to maintain a positive ROI. There are lots of platforms out there that can help you with this.
To learn more about the subtleties of CPM monetization, check out this post.
Nailing CPM monetization
Every app publisher should strive for high CPMs. In order to get the most out of your CPM monetization methods, which is only possible through accurate tracking and detailed analysis of everything that’s happening in your app, you should have a strong monetization partner at your side.
Therefore make sure to reach out and see if SOOMLA is the right fit for you as it can provide you with detailed data about your audience and advertiser performance, so that you can apply these insights for the purpose of increasing your app’s CPMs.