Cost per install is defined as the (equivalent) cost needed to generate an app install. Depending on the payment model you are using cost per install might be calculated very simply:
- If you are bidding CPI, cost per install is a fixed parameter in your user acquisition strategy. You won't pay more than the fixed price you have picked;
- In case you're paying CPM for the traffic, cost per install is defined using the following formula:
CPI = marketing campaign spend/ number of app installs
Cost per install might variate depending on mainly three parameters:
- the country in which you are running User Acquisition: every country has its own traffic price, and according to the above formula cost per install heavily depends on traffic cost;
- the platform, iOs or Android;
- the ROI: different traffic types and creatives generate users that you are able to monetize in a different way: thus the savvy marketer adapts cost per install to the return on investment that it generates.
Cost per install and ROI
When you want to calculate the right Cost per Install to use in your campaigns, you might want to have a look at the ROI that UA is yielding.
Many of the advertisers we are working with use some very advanced techniques to calculate and predict Return per Install. Since the monetization funnel takes time after the install, some prediction model is needed to measure the value brought in via an user acquisition channel.
ROI measurement (and prediction) is used to calculate the right Cost per Install for every acquisition channel. On average every new user must generate revenues for the advertisers bigger than the spending used to attract the new user.
Thus the LTV (user lifetime value) is used in the Cost per Install calculator:
LTV > optimal Cost per install
What happens to the Cost per Install in an economic downturn? We are not (yet?) in the middle of an economic crisis, but since the last months of 2022 companies tend to be more cautious about advertising spend, getting ready for a probable crisis.
Talking with our clients, we have found three simple strategies that might be used to calculate the right Cost per Install in the current situation.
Three strategies to lower cost per install in an economic downturn
- Adapt dinamically and quickly your cost per install. Measure ROI and adapt your cost per install, so you can save some spending that is not yielding good results. If you used to review spending and calculate the actual Cost Per Install once per quarter, now it's better to calculate it more frequently, so you can adapt CPI to Return On Investment faster.
- Be careful about fraud to reduce your UA costs. Cut traffic sources that are wasting your money. You can do that by measuring ROI (low Return on Investment is in some way similar to a kind of fraud) or by using some anti fraud tool, such as Appsflyer P360.
- Work CPA. Easiest way to reduce the upfront investment. If you are able to negotiate a good CPA with valid traffic sources, you might want to pay not on install, but after that, when the user has performed a post install action that you can monetize.
Follow the three simple strategies outlined above and you will improve the yielding of the money you are spending on User Acquisition. Mapendo offers a very flexible and efficient solution for User Acquisition, in case you want to give it a try, get in touch with our team here!