Cost per engagement (CPE)

Cost Per Engagement (CPE) is an advertising pricing model in which advertisers pay whenever a user takes a specific desired action within the app.

What is cost per engagement (CPE)?

What is a cost per engagement?

Cost Per Engagement, or CPE for short, is an advertising campaign model where advertisers pay for a specific user behavior within the app. Advertisers who understand the monetary value of post-install events can utilize this model to drive targeted and profitable behaviors. This can range broadly from completing registration, to completing a certain level in a game, or making a purchase.

Today, CPE campaigns often come in the form of reward-focused user acquisition campaigns. This is a fancy term for ads that reward app users with virtual rewards, premium content, and discounts. 

These offer ads incentivize users to take certain actions like watch videos, complete sign ups, or complete a tutorial. Because it’s opt-in and it rewards users, CPE campaigns often show high conversion rates and a greater ROAS (return on ad spend).

What counts as an “engagement”?

In the world of advertising, engagement can be defined as any interaction with content, which is often associated with social media marketing measuring comments, reactions, and shares. 

In the world of mobile advertising, in-app engagement is defined as any user interaction within the app after it’s downloaded. This includes everything from signing up, logging in, reaching a certain level in a mobile game, listening to a song, or booking your first hotel. 

How do you calculate CPE?

The formula to calculate Cost per Engagement is the total advertising cost divided by total engagements.

CPE formula

For example, let’s say your most profitable users complete the 4th level of your game. You spend $10,000 on your CPE campaign that measures level 4 completions, which drove 1000 engagements. Your CPE comes out to $10.

What is CPE good for?

CPE campaigns already acquired users, which is best for driving interactions within an app after it’s installed. Depending on the desired action, advertisers can pay on a sliding scale that makes the most financial sense. CPE campaigns incentivize in-app engagement, which measurably improves user retention, especially if measured against CPI or CPC campaigns.

Downsides of CPE

While CPE campaigns can be very profitable, it is most effective when advertisers have a comprehensive understanding of user behavior. Advertisers must understand what in-app engagement best indicates future profitable behaviors. Additionally, ad networks and DSPs typically charge by impressions, they may charge for impressions on top of the CPE rate in case the ads do not drive the intended engagement.

CPE vs. CPA vs. CPC vs. CPI

CPE vs CPA vs CPC vs CPI

The four most popular advertising pricing models are as follows: 

  • CPE: Cost per engagement. Advertisers pay per specific post-installation behavior.
  • CPA = Cost per action. Advertisers pay for a broad range of specified actions including app installs. They are usually connected to purchase events whereas CPE is connected to an engagement event but not purchases. CPE and CPI are the two types of CPA ads.
  • CPC = Cost per click. Advertisers pay for every click.
  • CPI = Cost per install. Advertisers pay for every installation.

What’s the ideal CPE?

Completing a level for one game could yield the same CPE performance as email signups for a health and fitness app. CPE can range from one cent to hundreds of dollars depending on the platform, the audience, and the engagement you’re measuring. Thus, there’s no ideal CPE; however, CPE campaigns make it easier to measure your return on ad spend, especially if you understand the potential dollar value of a user who takes that action.

How to improve your CPE campaign performance

While it may be enticing to pay for the cheapest engagement, take a look at your user behavior data to identify which behaviors yield the most profitable results. We recommend advertisers to leverage predictive marketing to accurately estimate which behaviors to focus on.

CPE campaigns are not infallible magic bullets. It’s integral that advertisers diversify their advertising by combining CPI and CPE campaigns to drive both installations and post-installation behaviors in parallel. 

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Key Takeaways

  • Cost Per Engagement (CPE) is an advertising pricing model in which advertisers pay whenever a user takes a specific desired action within the app.
  • A user’s interaction with an app after it has been downloaded is classified as in-app engagement in mobile advertising.
  • The formula to calculate Cost per Engagement is the total advertising cost divided by total engagements.
  • Despite the fact that CPE campaigns can be very profitable, it requires a thorough understanding of user behavior to identify the most profitable engagement to measure.
  • CPE usually is connected to a post install event that is not a purchase while CPA is usually connected to a purchase.
  •  Advertisers can use predictive marketing to determine which behaviors to focus on by leveraging predictive analytics.
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