If you are new to the mobile marketing industry, one of the first few things you’re going to see is that everyone is watching and playing with their numbers.
For example, if you are a company that deals with ads, companies will decrease/increase the rate they show their ads depending on the time of the year, time of the day, the amount of requests they are receiving, the specific campaign, and probably another 100 factors... and all of this to affect how the numbers play out.
Companies do this to track the money coming in and find new ways to increase profit and the overall return on investment (ROI). Since the competition is increasing and technology is moving so fast, it is important to be aware of how to adjust your numbers to get the most out of them.
Knowing how to manipulate numbers can provide you with a HUGE competitive advantage (why do you think companies spend so much money and time on hiring good mobile marketers?).
For this reason, metrics are created to track performance to help you know why and if it is going the right direction (or the wrong one).
The most important thing to know about the metrics that I am going to show you is that they influence income. What makes you a good/bad marketer is how much you can use these metrics to your advantage, show results, and make the company money. The goal is always going to be to minimize cost and maximize profit, but of course you already knew that.
So if you are new to the industry, let me welcome you, and let me tell you that it will never get boring. As I said, the industry is always changing and moving. There is always going to be new things to learn, but these metrics will be a good start for you.
The 5 metrics that every mobile marketer should understand.
There are obviously many more metrics that you can learn and use, however, I think the following will give you a good idea of how things work, especially if you are going to be working with the monetization team of your platform or with the user acquisition (UA) team.
Let’s explore the 5 metrics:
CPM (Cost per Thousand):
This simply means the cost of one set of 1000 views (amount of times the ad was seen) when you are running an advertisement campaign. Basically, if your CPM is $5.00 when advertising with Facebook, you are going to pay 5$ every time Facebook shows your advertisement 1000 times.
I’ll give you another example:
You are showing an ad on YouTube and your budget is 100$. YouTube may say that they will want to charge you 10$ every time your ad is seen 1,000 times, in other words a CPM of 10$. With your budget of 100$, you will only be able to show your ad 10,000 times.
NOTE: Every advertisement company/platform will have different prices for those one thousand views, and CPMs can change by the second.
As the name states, CPM is usually associated with cost. However, that is not always the case. Let me explain as you could be the person advertising, or the person publishing ads, for ad networks:
- If you are an advertiser (meaning you are paying to get an ad published on a platform), you would want your CPM to be the lowest. The higher the CPM, the more money you are paying to advertise with that company/platform. Obviously you want to save some money for your company, so depending on what you are advertising, you might want to find advertisement companies that charge lower CPM.
- If you are a publisher, such as a game developer, blog owner, advertising company, or own any medium where you would make money of off ads, you want the CPM to be higher. Why? Because the higher the CPM, the more money advertisers are paying to advertise through your application or medium… and the more cash you are getting from showing ads.
Be careful. These two scenarios are not always the case. As I said, companies play with their numbers. Usually the size of your budget and the amount of impressions you want to buy will also play an important part in CPMs. So make sure to always be aware of how much money that CPM will make you and your company.
There also exists many other factors that may not let numbers play out exactly like the two scenarios above. However, usually the higher the traffic, the lower the CPM, and vice-versa.
CLV also known as CLTV or LTV (Customer Lifetime Value):
A very important metric, it means the average value that a new customer will bring your company over their time period using your company’s platform.
For example, let’s say you are the owner of Candy Crush. What you will find is that some players will spend 100$ during their whole lifetime playing Candy Crush, some others will spend only 20$, and some others will never buy anything because they are ok with using rewarded ads. All of the three types of users (and there are usually more than 3 types), are making you money. However, the CLV is the average amount of income that a new user will bring you during their entire lifetime playing the game, so the CLV would be the average amount of money between the three types of users.
Another example would be that if let’s say the average Apple user goes through 10 iPhones in their entire lifetime, then your CLV is the combined money of those 10 iPhones, let’s say $10,000. You can then expect each new client to spend an average of $10,000 through their time using iPhones.
Remember that the CLV is calculated for the whole span of time that a user spends using your application. This means that a CLV of 1,000$ could be spent by the user during the next 20-30 years using your application, and not necessarily in a single transaction.
This metric is mostly related to revenue. If a CLV is high, it probably means that a new user will most likely make more than one purchase from your product/service during their lifetime. Also, if you know you have a high CLV, it can mean that you can afford to spend more money in acquiring new users, which I will explain more in detail in the CPA section.
DAU (Daily Active Users):
This one is simple, but it is an important metric. It means the average number of people using your platform on a daily basis. It can also be calculated on a monthly basis as Monthly Active Users (MAU).
Also related to revenue, the more active users you have on a daily basis, the more people you have clicking on your ad and buying your products/services, which provides you with an idea of whether your app is becoming more popular or losing users.
It is also worth mentioning that it does not necessarily mean that a higher DAU will increase revenue, and a lower DAU will lower your income. There are always other factors such as CPM, and whether or not the users playing your game (or using your platform) are the most profitable segment.
There are ALWAYS multiple factors to look at.
CTR (Click-Through Rate):
If you have shown your ad 100 times (100 impressions or views), and has been clicked on 10 times, it means that your CTR is 10% (10/100=10%). CTR is the ratio between the amount of traffic on your ad (or how many times it has been shown) and the amount of times the ad has been clicked on.
This one is both related to income and cost. The higher your CTR, the more effective your ad is, and the more people you may convert into clients. On the other hand, if your CTR is low, you are paying for an ad that is not giving many results, meaning it is decreasing your ROI.
To give you an idea, the overall average CTR in the industry is about 2-3%, so if your ad has a higher CTR of 3%, you are doing your job correctly as a mobile marketer and are better than most marketers.
CPA (Cost per Acquisition or Cost per Action):
Let’s say you created an advertisement campaign that had a total cost of $1000. Out of the $1000 spent, 50 people that saw the ad actually bought a product. In this case, your CPA would be 20$ (1000/50) as that is how much it cost you per every individual that you converted into a new client.
CPA is the total monetary cost that it took you to get a new client.
The CPA is one of the most important metrics for most companies, it determines the real ROI of any ad campaign. If your CPA is too high, your campaign might not be profitable. However, some companies can afford higher CPA rates than others depending on their business model. The idea here is that your CPA should be lower than your CLV (Customer Lifetime Value). If you achieve this, you can expect the user you just converted to spend more money than what it cost you to convert them.
If your CLV (Customer Lifetime Value) is $100 and your CPA is $50, it means that you can expect to profit $50 from that client, and you will have a positive ROI. In other terms, you spent $50 to acquire a customer that will most likely spend about a $100 through their lifetime, so you have profited $50.
So, CPA<CLV = You are making money.
It is all about ROI and profit.
No matter which of these metrics you will be using, there are two metrics that will always matter (truly, the only ones that matter to the people on top of your company). Those are ROI and profit, so when you are looking at these metrics never forget to think of how you can manipulate and use these metrics to increase these two things. If you increase these two things, the company will always be happy with you - no matter how the numbers play out within these metrics.
Are you a mobile marketer? What other metrics do you use in your day-to-day job? Tell me in the comments section!