Banking

Understanding cost-per-click and cost-per-action for mobile ads

Learn the main differences between mobile ad payment methods cost-per-click and cost-per-action to determine which one (or two) is right for you.

If you provide free content for mobile devices, you have most likely planned on using advertising to help monetize your efforts. With several billion dollars being expected to be spent on mobile advertising in 2012, you can expect a lot of vendors to be competing for your attention.

To take hold of these revenue opportunities, it helps to understand the difference between different payment methods; in particular, I'll talk about cost-per-click (CPC) and cost-per-action (CPA).

Many choices

I recently spoke at AnDevCon III, and not only was the trade show floor packed with ad networks and ad mediator companies, but the main sponsor of the conference was an ad network. Content providers (app developers -- that's you!) must choose not only a vendor, but also ad formats.

Sometimes the vendor does just one type of payment (per click or per action), but other times they mix it up. Some ad formats are exclusively one or the other. You'll have to do a little checking to see what you're getting into.

So, what's the big difference between CPC and CPA?

  • CPC: More people are familiar with CPC than CPA. Users see an ad or other offer, and if they click the ad, you get a few cents. This is very similar to AdSense ads that are used on most websites; however, the revenue per click is usually much lower than for the highly targeted ads used on websites. The good news is that you're paid as soon as the user clicks -- it's up to the advertiser what happens after that. This means that revenue will trickle in as users click, giving you a fairly predictable income throughout the day.
  • CPA: This method only pays when a specific action (e.g., installing a different app or signing up for a credit card) is completed. The reward for completed actions can be much higher than for clicks -- the advertiser has achieved a guaranteed result. Not every click will result in the required action - some users will realize they aren't actually interested, for example. Revenue varies widely from day to day, and you may see clicks but no revenue. This can be disconcerting at first.

How to choose

I use both systems. Ad revenue has plenty of ups and downs just with CPC systems, but CPA networks can bounce around enough to test your stomach. On some days, I can see a $4+ eCPM from CPA networks, and on others no revenue at all. I combine the two systems depending on what works best for each app and to smooth out income levels.

You may want to start with CPC networks to make things simpler and easier to track in the beginning. Good luck!

About

Tim Mackenzie, author of the Android Income Series books, is a software engineer that escaped the cubicle world at a large company to go solo with Android app development. He uses this freedom to teach others how to make money with Android apps. Visi...

1 comments
Gemmz
Gemmz

CPC and CPA are fine, and Tim MacKenzie is right in his assertion that mobile advertising is still under exploited. The crucial element in any campaign is not either of the above, both of which are useful metrics, but the overall return on investment. That is after all, the make or break. There is one new development that I have not yet heard mention of and that is the now common element of "private browsing" which essentially means no cookies and no javascript being performed by their browsers. I noticed clicks coming through with no mention in my analytics software. A peek at my server stats revealed a very different situation. I would be interested in any observations you guys out there may have. The above will have a serious effect on tracking any campaign, mobile or search based. You need to change your strategies now as the impact will be far more profound than any Google slap!