Ad spend is the amount of money spent on paid advertising for a mobile marketing campaign.
What is ad spend?
Your ad spend describes your paid investment in mobile advertising campaigns – in other words, how much you paid to place your ads. Depending on how you want to use the data, you can calculate ad spend for a specific channel or for a total campaign.
Why is ad spend important?
Tracking and understanding your ad spend helps you measure the effectiveness of your campaigns and allocate budget accordingly. If you know your ad spend and can attribute leads or sales to specific ad campaigns, you can calculate key performance indicators (KPIs) like ROAS (more on that to come). With this knowledge, you can stay within budget, tweak underperforming campaigns, or divert more money to high-performing ones.
Ad spend post-iOS 14
Apple’s ATT privacy framework, introduced after the 2021 launch of iOS 14, requires apps to ask for user permission before collecting and sharing data. As not all users consent to this, advertisers have less user-level data to accurately measure campaign performance.
Additionally, due to the data collection restrictions, mobile marketers have experienced changes to Facebook Ads, including higher costs and fewer metrics for tracking.
Faced with these challenges, marketers are increasingly diversifying their ad budgets across multiple platforms, including Google, Facebook Messenger chat, and other search and social media platforms. Some have shifted their ad spend from Apple to Android, which has yet to implement such strict data privacy updates.
Google (including search, YouTube, and Google Play Store) has grown in popularity for app marketers as an alternative advertising platform. It not only enables Facebook data tracking through Google Analytics, using UTM parameters on a website’s URL, but offers the advantage of targeting users based on their search intent.
How can you calculate ad spend?
Different advertising platforms may price their ads by click, impression, or download. With fragmented metrics, it’s important for mobile marketers to understand how each one is calculated and to be able to compile their own KPIs to compare how different channels are performing. To help you calculate and compare ad spend across metrics and platforms, here’s a basic explainer of the popular ad spend KPIs.
Cost per click (CPC)
CPC measures ad spend by the cost charged to advertisers for each click on their mobile ad. This is a cost-effective pricing model for advertisers because they only pay when users engage. It’s important to track CPCs for budgeting, as clicks can add up quickly.
While it’s a good measure of engagement, CPC doesn’t guarantee conversions: in short, you won’t get installs unless you can clearly demonstrate your app’s value. Advertisers can improve performance by working on aspects like keyword relevance, click-through rate, historical performance, and landing page quality.
Cost per mille (CPM)
In the CPM pricing model, advertisers pay for every 1,000 (“mille” in Latin) impressions of their ad. This helps you understand how wide an audience your campaign reached.
While CPM is a great method for tracking awareness, it can also become costly with little return, as it’s focused on views rather than conversions. Its measurement is also limited as it may include just partial views of an ad.
Cost per lead (CPL)
CPL measures the ad spend required to generate one lead. A lead is typically defined as a user who has demonstrated interest in your app through actions like completing a form field or downloading a content asset. In this pricing model, advertisers only pay when they obtain the lead’s contact information.
CPL can be expensive, but directly translates to leads and, ultimately, sales and revenue.
Cost per action (CPA)
In the CPA pricing model, advertisers pay for a specific action taken by a user, such as an app download or item purchase. This action is determined by the advertiser and is paid at a fixed rate.
CPA provides a way to measure the profitability of a campaign with minimal risk for the advertiser, since they only pay when a user completes a specific action. This pricing model is not offered as frequently by ad platforms, but can be calculated internally to assess a campaign’s performance.
Cost per sale (CPS)
CPS is a pricing model where advertisers pay for each purchase completed by a user. This model carries a low risk for the advertiser, since they only pay when a sale is generated. It’s also more specific than the CPA model, as it focuses solely on actual sales.
Cost per install (CPI)
In the CPI model, advertisers pay when a consumer installs an app. CPI is an effective way of gauging user engagement, as higher install rates indicate a successful campaign and can help forecast sales. If your CPI is too high, your campaign may not be profitable: you might need to refine your audience or creative for better results.
Reaching the intended audience in the CPI model often requires significant investment in the right channels, which can be costly and time-consuming. CPI is most effective when combined with other engagement KPIs, such as ROAS, to ensure the continued success of the campaign.
Ad spend vs. Return on ad spend (ROAS)
Calculating your ad spend is a critical step to be able to measure your ROAS (Return on advertising spend). Knowing your ROAS helps you evaluate your campaign’s overall return on your investment (ROI). To calculate ROAS, follow this formula:
ROAS = Total revenue attributed to the campaign / Total ad spend
The higher your ROAS ratio, the more successful the campaign, and vice versa. But keep in mind that ROAS only considers the money spent on ads — not other marketing overhead costs like salaries, software, or ad production.
While ROAS is a quick way to assess your campaign’s performance and find areas to improve, it can fall victim to data inaccuracies. Tracking costs, conversions, and revenues across multiple channels can be challenging, particularly when privacy restrictions limit data collection. Also, don’t forget to factor in after-tax deductions and store commissions for an accurate evaluation.
Remember, ROAS isn’t a one-size-fits-all measurement. It’s best to review it regularly as campaign goals and dynamics change over time.
- Ad spend is the amount of money you spent on a particular advertising campaign or channel.
- Ad spend is about the cost of placing ads on paid channels: it does not take into account your total marketing costs, including ad production or marketing staff.
- The privacy restrictions brought in with iOS 14 have led many mobile marketers to diversify their ad spend, due to higher costs and more limited analytics.
- There are many ways to measure ad spend, including CPC, CPM, and CPA. Different ad networks provide different metrics depending on their pricing models.
- Mobile advertisers can dig into their mobile analytics platform to calculate any KPIs their ad platforms don’t provide, like CPI or CPS.
- When you know your ad spend, you can measure the effectiveness of your campaigns and adjust your ad messaging and design to improve results.