Game developers' senior staff and Ad Monetization Managers typically pay the most attention to eCPM.Over the past seven years, working in the mobile, free-to-play video games industry, eCPM has been a recurring topic we hear from colleagues, leadership teams, and clients:
“I heard this game has $20 eCPM, and we only have $12. What are we/you doing wrong?”
"Our first game's eCPM is $10, while our second game's is $6. Why aren't we working harder to achieve the same eCPM?"
But is eCPM really a relevant metric in ad monetization?
Outside of the proper context, eCPM is the trickiest and most useless metric in ad monetization. In this article, we will provide some concrete points to support our claims: eCPM is the most useless metric in ad monetization.
The following article will help you understand what eCPM is, how it works, and the ten most important things you should know before discussing it with your colleagues (or your boss). We will cover the essential factors that determine eCPM and later go into an advanced analysis of the metric and the true value it provides when assessing an ad monetization strategy.
Essentially, eCPM stands for effective cost per mile, which shows us how much money we make per thousand impressions (ads) that our players see. As the value of those advertisements primarily comes from the installs and other actions our players take, and not just from viewing them, it averages out our earnings over thousands and millions of ads we offer.
Ad formats are crucial, and their significance cannot be overstated. Various ad formats inherently have different eCPMs, so comparing eCPMs without considering the same ad format does not make sense.
We commonly see that banner ads typically offer the lowest eCPM. In contrast, rewarded video ads and interactive ads generally bring in much higher eCPMs. So, why is there such a variation in eCPM among different ad formats?
The answer is quite straightforward.
This disparity stems from the inherent differences in these ads. Rewarded video and interstitial ads have much higher eCPMs compared to banner ads because they are more engaging and occupy the entire screen. They often come in dynamic formats, like videos or playable ads, with clear calls to action. This heightened visibility and interaction significantly increase player engagement and the likelihood of successful conversions.
The combination and application of different ad formats can drastically influence a game's eCPM. Hence, when we compare eCPMs across different games, we must compare them with the eCPM of the same ad format.
This aspect is straightforward. Regardless of the ad format, eCPM varies significantly from one country to another. Typically, eCPM is much higher in countries like the United States, Germany, and Japan than in countries such as India, Egypt, Brazil, and Serbia.
This variation is primarily due to economic factors. On average, players from the former group of countries possess greater purchasing power, making them more valuable to advertisers. Therefore, when comparing eCPMs across different games, it is only logical to make such comparisons within the same country.
A few years back, it was a common understanding that iOS players, on average, generated higher eCPMs than Android users. The rationale was similar to the previous point: iPhone users typically spend more on their devices than Android users, implying higher purchasing power. This makes them inherently more valuable to advertisers, as they are presumed more likely to make purchases or spend more.
However, the scenario has evolved. With Apple's effective phasing out of IDFA, advertising campaigns on iOS have become less effective, diminishing the likelihood of conversions. Currently, it's not unusual to see games where the eCPM is actually higher on Android. Therefore, when we compare eCPMs between different games, a meaningful comparison can only be made when we are considering the same platform.
Even if you're not deeply involved in the mobile advertising world and are more focused on in-app purchases, this should be easy to grasp.
Imagine a familiar scene: a game hits the market, we start drawing in players to test it out, and soon notch up the first few thousand installs. Things look bright – retention rates are high, ARPU is solid, and the CPIs aren't too shabby. It seems like we're on track to a winning game.
But as we begin to scale up, the landscape shifts. CPIs climb, retention, and ARPU start to drop. Suddenly, we're left wondering about the game's profitability and whether we can really make it a success.
Sound familiar?
Here's the catch: hitting any game KPI benchmark is doable on a small scale. But as things grow, that's where the challenges kick in.
The same goes for ad monetization. Getting eCPM right is one thing when you have tens of thousands of impressions daily, but it's an entirely different challenge with hundreds of millions. The diversity of ads shown to players and the odds of an install also play a big role. So, when we're comparing eCPMs between different games, the only sensible comparison is between games of approximately the same scale.
Consider two games at opposite ends of the ad strategy spectrum. One uses a single ad network for its player ads, while the other has a sophisticated mediation setup. This advanced setup includes multiple ad networks, incorporating both bidding and non-bidding types. It features waterfalls with 20 to 60 instances, each with varying eCPM floor prices, bid floors, segments, and tiers.
In the more complex setup, the competition and demand among ad networks are significantly higher. This increased rivalry is exactly what pushes eCPM upwards. A well-managed mediation setup, constantly fine-tuned, plays a crucial role in maximizing ad ARPDAU by boosting eCPM. It's a smart move for developers to continually optimize their mediation setup, conduct A/B tests, and engage in other activities to find the most effective mediation strategy. However, it's also key to recognize and understand the influence of other factors.
Industry discussions about eCPM usually zoom in on this aspect – comparing eCPM and mediation strategies to enhance performance. This focus is understandable, but it often overshadows other critical elements. If one game's eCPM is five times lower than another's, it doesn’t automatically point to a strategy flaw. Other factors might be at play, impacting eCPM beyond just the mediation setup.
The next set of factors we'll discuss isn't typically the subject of casual industry chat, especially with busy C-level executives who prefer concise and straightforward answers. Even among seasoned professionals, these aspects aren't commonly broached in everyday discussions about eCPM.
The impact of a player's age in the game on eCPM is quite fascinating. Data suggests that players who have been in the game longer tend to have lower eCPMs compared to newer players. Interestingly, these long-term players are often the most valuable in terms of in-app purchases due to superior retention. They likely have longer, more frequent gaming sessions and are more inclined to make purchases. So why is their eCPM lower? I have a few theories.
This player age data isn't typically accessible to ad mediation providers unless developers include it in their ad requests. Therefore, it's not widely available or frequently analyzed. Let's look at an example of how eCPM varies with player age in a game. The data is from October 2023, focusing on rewarded video ads on the Android platform in the United States. To maintain confidentiality, we've set the Day 0 - Day 1 eCPM as 100%, and all other data is presented as a percentage of this baseline.
Here's what we observed:
It's crucial to note that this doesn't necessarily mean these players are the least valuable from an ad monetization standpoint. Given their high engagement with the game, they're likely consuming more ads and thus have a higher Impressions/DAU count. This higher ad engagement could potentially offset the lower eCPM.
All this leads us to a key conclusion: comparing eCPMs between two different games isn't straightforward, especially when player age distributions vary significantly. Ideally, when discussing eCPMs, we should be considering games with similar player age profiles.
The usage rate is a crucial yet often overlooked metric in discussions about eCPM. Available on mediation dashboards, it indicates the average number of ads shown to a player who has watched at least one ad, also known as Impressions/Daily Engaged User or Impressions/DEU. So, why is this metric so vital? It boils down to eCPM decay.
Each additional ad shown to a player generally lessens the chance of them installing an app. Therefore, the eCPM for the first ad a player sees in a day tends to be higher than for, say, the tenth ad. We looked into data from October 2023 to illustrate this point, on both Android and iOS platforms, rewarded video ads, and interstitial ads, focusing on the United States.
Here are some key observations:
When comparing eCPMs across different games, it's ideal to consider games with a similar usage rate. This ensures a more accurate comparison, as it accounts for the diminishing value of ads to players over multiple views.
Ad Monetization Managers have a range of tools at their disposal to influence which ads appear in their games. While it's not feasible to micromanage every single ad shown to players, there are options for a degree of control. These range from broad category blocks (like politics or religion) to more specific genre filters (such as puzzle or casino games) or even targeting a single app or a particular ad campaign.
Here's the key point: The more restrictions a developer imposes on ad content, the smaller the pool of advertisers vying for ad space becomes. This reduction in competition can lead to potentially lower eCPMs. It's a different scenario when a developer blocks only a few main competitors and sensitive categories compared to entirely excluding certain genres known for heavy advertising.
Thus, when we compare eCPMs across different games, it's crucial to consider the extent and nature of the ad blocking strategies employed. This context is essential for understanding why certain games may have higher or lower eCPMs, as these strategies significantly influence the competitive landscape for ad impressions.
If your game has been featured in a prominent spot on the Apple App Store or Google Play Store, like a hero banner, you might have noticed some interesting trends. Although such featuring can lead to a significant increase in organic traffic, there's often a noticeable dip in retention, monetization metrics, and other KPIs.
Why does this happen?
When your game gains more visibility in the store, it attracts a wider, more diverse audience. Many of these players might not be actively seeking what your game offers. They try it out briefly and then move on. This is a clear example of varying player quality and how it affects game metrics.
This principle extends to ad monetization metrics as well. The type of players your game is attracting at any given moment—whether they're coming organically, through paid channels, or specific types of campaigns—affects eCPM.
For instance, cheap installs from low-CPI campaigns tend to yield low eCPM. Conversely, players acquired from campaigns targeting more challenging in-game events (like purchases or retention) often cost more in user acquisition (UA) but result in higher eCPM on the ad monetization side.
As a result, even two identical games on the same platform in the same country, using the same ad format and mediation setup, can experience vastly different eCPMs based on the source and quality of their players.
When comparing eCPMs between different games, it's therefore essential to consider where the players are coming from and the nature of the UA campaigns currently in play. This context is key to understanding the discrepancies in eCPM across different games.
User acquisition significantly influences eCPM through the quality of players it brings in. However, another pivotal aspect is the demand side. Factors like changes in advertisers' budgets—increases, decreases, or total shutdowns—and whether they have blocked your game for some reason play a huge role in shaping eCPMs. For Ad Monetization Managers, these demand-side elements often represent a major uncertainty, adding another layer of complexity to the already intricate eCPM puzzle.
By now, you might have realized that even if you align all other variables - the same ad format, country, platform, scale, comparable mediation setups, player age, usage rate, blocking strategies, and player sources - there's still an element of the unknown that can render eCPM comparisons between different games moot.
To illustrate this, let's look at data from five games in the first half of November 2023. Here's the catch: all these games are from the same genre, focus exclusively on rewarded video ads, operate in the United States, use Android, have a similar scale, employ the same mediation provider and ad networks, and follow identical optimization strategies.
Player age hasn’t been specifically filtered, but given the game genre, significant variations are unlikely. We're also only considering the very first ad impression per user per day, with no ads blocked except for sensitive categories, and all traffic is organic. Yet, even with all these similarities, the lowest eCPM is still half of the highest one.
Quite the conundrum to explain, right?
To wrap up, it's important to be cautious when comparing eCPMs across different games. Those quarterly industry reports that list eCPM values are certainly worth a look, but they need to be taken with a substantial amount of skepticism. Simply put, a higher eCPM in one game doesn't always mean it's better at ad mediation optimization.
The real value lies in the discussion of strategies for mediation optimization and other elements of the ad monetization setup. It's more beneficial to focus on these strategic approaches rather than just the eCPM numbers. This way, we shift the conversation towards enhancing the actual value that ads bring to our business, moving beyond basic comparisons of figures to a deeper understanding of effective ad monetization practices.
