What are cost models?

Glossary What are cost models?

The definition of cost models

Mobile advertising payment mechanics are the method through which advertisers purchase campaign inventory. Each mechanic works on a “cost per” basis. When a user completes a particular pre-agreed action (and when it can be proved complete) the advertiser pays the publisher.

The total cost of a campaign is calculated by determining how many different users from that particular channel completed the action during the length of the campaign.

What are the different cost models available to advertisers?

There are many different payment mechanics, but these are the most widely used approaches in the mobile advertising space:

  • Cost per mille (CPM): The advertiser pays the publisher every time a thousand impressions are recorded on a single advert.
  • Cost per click (CPC): The advertiser pays the publisher every time a user clicks on an advert.
  • Cost per install (CPI): The advertiser pays the publisher every time a user clicks an advert and then goes on to install the app featured within that campaign.
  • Cost per action (CPA): The advertiser pays the publisher every time a user interacts with an advert, opens or installs an app and then completes an action (e.g. a newsletter sign up).

Other purchasing mechanics exist – such as cost per engagement – but in the mobile advertising space, these four approaches are the most favored among advertisers.

Why is it important to know these different cost models?

The first reason why it is important to know about different payment mechanics is that different approaches to purchasing mobile advertising will suit different purposes. For example, an advertiser might need to generate a certain number of installs at launch to give an app the best chance of success. In this case, CPI is the most useful buying mechanic because the advertiser will only pay if a publisher meets their target and it allows them to get a rough cost estimate up front.

However, an advertiser for an established app that uses a membership scheme to monetize might be less interested in CPI. Instead, such a company might find using CPA works better as it guarantees they only pay for the most interested customers.

Understanding purchasing mechanics also matters because different mechanics offer varying levels of risk and cost. CPM is, for example, relatively risky to the advertiser as it offers no guarantee of user action, but formats that use it are fairly cheap. While the likes of CPI and CPA lessen the risk of no returns to the advertiser, they also increase the cost of campaigns.

It’s useful to know about all the payment options for mobile advertising to help you select mechanics that suit an app’s budget and the needs of the business it serves.

Cost models and Adjust

The primary challenge for advertisers is verifying with publishers when a payment has to take place. Without proper use of attribution tools and tracking links in place, it is possible that advertisers could get overcharged or pay for traffic that they needn’t have (such as organic installs).

Adjust helps advertisers avoid this problem by attributing every paid install with our mobile app attribution offering. By providing every campaign with a unique tracker URL and providing the advertiser with a simple to use dashboard to assess campaign performance, Adjust helps advertisers accurately count installs, impressions and events to ensure they pay the right sum to networks.

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