It’s notoriously difficult to balance quality and scale in user acquisition campaigns, since increasing scale can mean risking quality. The key to minimizing this risk is to buy app advertising inventory according to different pricing models, such as CPE.

What is cost per engagement (CPE)?

CPE, or cost-per-engagement, is a pricing model used in mobile campaigns in which advertisers choose a post-install event to measure and only pay for the users who engage in that specific app event. In these sorts of campaigns, advertisers can set the event to whatever they’d like, such as: completing registration for an app, or reaching Level 2 in a game.

The trick is to ensure you use your app analytics to set the engagement at a point where users will have become hooked on your app. If the user doesn’t complete the post-install event that your analytics say will guarantee you a certain LTV, the advertiser simply doesn’t pay. This means that positive ROI is almost assured.

With CPE, performance advertisers only need to shell out for users that they deem are “high quality.” After all, a user who took the time to complete a registration or get to a certain level is more likely to have a higher LTV than a user who tapped ‘install’ and never looked back.

The problem is scale. In contrast to CPE, rewarded CPI campaigns (using an offerwall ad unit, for example) are often used by advertisers looking to get as many installs as possible. In instances like this, advertisers are satisfied with getting lots of (possibly low quality) installs as long as the rush of installs pushes their app to Number 1. These batch users are low quality because advertisers typically set the threshold to be acquired very low - just a quick tap to install. (Aaddicted gamers might install any app presented to them as long as it got them those extra few coins. More on this later.)

CPE, on the other hand, prioritizes quality - sometimes at the expense of scale. Since the threshold for payment is higher (ie, getting to Level 2), only some will pass through.

To pick up the slack, it’s best to combine the CPE pricing model with an ad unit that is known more for its ability to acquire users at scale, such as an offerwall.

What are offerwall ads?

An offerwall is a type of app advertisement that gives users in-app rewards or incentives in exchange for completing an action, such as installing an app listed on the ‘wall’. It is user-initiated, meaning users tap on a button to view the offerwall and choose whether or not they want to engage with it.

Because installs from offerwalls are rewarded, the acquired users run the risk of being low in quality. But this can actually be used to an app marketer’s advantage, since it means offerwall inventory is more competitively priced than inventory of other ad units. The goal with rewarded ad units like offerwall is to find the right price for those lower quality users to make the campaign sustainable. Offerwalls can be an ideal fit for advertisers looking for cost-effective scale.

Combining CPE and offerwalls to your advantage

Since CPE is high-quality and low-scale and offerwalls are often low-quality and high-scale, buying offerwall inventory on a CPE basis is like putting two pieces of a puzzle together, it just fits. Together, you have a combination that drives high-quality, high-scale campaigns - which critically, are cost effective.

The biggest benefit of CPE is that it pushes users to “try” the product that’s being advertised. Because organic discovery is so difficult, users who wouldn’t have otherwise come across the app on the App Store might not have known there was an app out there that they either or enjoyed or needed.

For example, let’s say you purchase offerwall inventory and set the engagement event to “users who reach Level 2.” Since it’s rewarded, you’re likely to see a large sum of app installs. But since it’s CPE, you’re not paying for everyone who taps “install” -- just the users who first install your app from the offerwall and then continue playing long enough to reach Level 2.

How to set your CPE engagement event

It’s recommended that advertisers set the engagement event to an event that happens just before the “tipping point.” The tipping point is the point in the game that is most likely to bring about payout, scale, and engagement. In other words, it’s the point in the app in which users begin spending enough money or watching enough ads to generate a high LTV. The ratio between the CPE conversions and how many users reaching the tipping point should be your main optimization methodology.  In this case, Level 3 is the tipping point - which is why the engagement event was Level 2.

Bonus: Adding a CPA campaign objective as a failsafe

Your campaign optimization should always take into account the impact rewarded ads can have on behavior. You may see a higher drop off with rewarded CPE, since users might reach the engagement event, collect their reward, and leave. Therefore, it’s wise to pair CPE with another, deeper campaign objective, like a CPA, ROAS, or a specific retention goal. If the CPE is Level 2, then set a CPA target for Level 5. The second target acts as a failsafe and will balance out the low quality users that only completed the initial engagement event because it was rewarded.

If after calculating their LTV at various stages throughout the game, advertisers see that users who reach Level 5 will go on to generate $40, then paying $30 for that user in a CPA campaign is worth it. In the end, they’re guaranteed a $10 profit. The next step is to set the CPE to Level 2, while you’re optimizing towards a $30 eCPA for Level 5.

Advertisers must be strategic when it comes to managing their user acquisition campaigns. It’s important to carefully consider which ad units match with which pricing models - offerwalls and CPE is just one of many successful marriages. If advertisers continue thinking prudently, they’ll never have to make the Sophie’s choice between quality and scale again.

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