What is the best way to buy users?

Ilya KoshelevTheory

Today, there are often fierce disputes over how to buy users more efficiently. Before I try to answer this question, I suggest you understand the terminology. 

• CPM – price per 1000 impressions;
• CPC – cost per click;
• CPI / CPD – price per installation / installation;
• eCPI – expected price per installation when purchasing CPC
• CPA – price per action;
• CTR is the ratio of the number of clicks to the number of impressions. Measured as a percentage. Allows you to evaluate how well the banner is made;
• ARPPU is the average profit per paying user.

As for purchases. The most obvious answer: the type of purchases depends on the goals of the campaign.

However, as a rule, it is best to purchase those CPAs where the action is a payment, provided that the ARPPU is greater than the CPA.

But, you need to understand that you should only be interested in the positive ROI of the campaign. And therefore, options are possible. 

There are the least risks in buying traffic with the installation price when eCPI or CPI is compared with the average profit of the user – LTV. 

It is clear that CPI or eCPI should be less than LTV – the average user profit over the lifetime, and how this condition is achieved is not so important. 

Let’s try to dig a little deeper and figure out the difference in buying traffic on a CPI /CPC/CPM basis. I will not go into details about the types of traffic channels (motivated, not motivated, discovery, etc.), about this another time. 

First, we will clearly show the funnel with conversions: 

The effectiveness of an advertising company is calculated as follows:

• If we buy CPM, then we look at CTR
• If we buy CPC, then we look at CTI
• If we buy CPI or CPA, then we look at the conversion (PC – paying conversion) 

They can be counted according to the following formulas:

• CTR (click-through rate) =  Clicks ⁄ Impressions 
• CTI = Installs ⁄ Clicks  
• PC (Paying Conversion) = Paying users  ⁄  All users

From these formulas for calculating the purchase of the final installation, it can be calculated that: 

• eCPC= CPM*CTR
• eCPI= CTI*CPC or
• eCPI=CTI*CTR*CPM

Practice

Due to the high dependence on CTR and CTI, I would not advise buying CPM until there is a traffic channel in which you can be sure which banner format will have the maximum CTR.  Otherwise, you can unscrew several thousand impressions and not achieve a single installation. Although I have never seen such a thing in the last two years. 

To begin with, I would advise you to choose between CPI and CPC:

Example:We buy traffic with CPC = $0.05 per click and an average conversion from click to install of 10% => eCPI = CPC / 0.1 = $0.5. 

If we compare eCPI with CPI, which in rare cases will be below $1 for unmotivated traffic, especially for iOS, it turns out to be more profitable to buy by CPC.  

However, it should be understood that then it is worth monitoring the conversion from click to install. This can be influenced by several factors – the number of redirects from the banner to the store, the size of the promoted application (applications in 30 MB will download more than an application in 150 MB with the same number of clicks), the quality of the promoted content, and so on. 

And if the conversion rate is less than 5% (and in most channels it is not 2%), then the eCPI will be $1 ($2.5 based on CTI = 2%), and then you need to think about what is better to buy. If there are large budgets, it is better to try all purchasing channels by CPI and CPC, gradually weeding out inefficient ones, observing conversion rates. 

I would take the average prices per installation from this table from Newzoo, broken down by region:

Yes, recently many people have been trying to buy a certain number of installations per day to get into the top and get organic traffic. And for such a strategy, the CPI becomes the least risky.

It is also worth adding about the influence of the viral coefficient on traffic attraction. 

Example:Let’s say we bought 1000 installations for $1000. 

CPI = 1$. A in

The viral coefficient for this channel is 0.1. 

That is, we will get 1100 installations for $ 1000 and eCPI will be $0.91. 

P.S. It will be possible to talk in detail on this topic personally with Ilya and other Nevosoft employees next February at Winter Nights: Mobile Games.