1. General process of Internet advertising
Take our most frequently contacted information flow advertisement as an example. When a user opens an APP, they sometimes browse to an advertisement (advertisement display, also known as exposure, abbreviated as m), and the user may click on this advertisement (ad click, abbreviated as c) In the details page (also called "landing page"), the user may click to download (ad download, abbreviated as i), register after installing the game (usually fill in the phone number, abbreviated as a), and play for a while After time, there may be recharge (paid, abbreviated as p), and there may be more in-depth user behaviors in the future
2. Basic Terms of Internet Advertising
1. Four basic roles:
Advertiser (advertiser), media (publisher), advertiser (agency), audience (audience)
Advertisers : refers to people who want to advertise their own brands or products, such as BMW, Intel, Mengniu, and play games
Media (publisers): a carrier that provides advertising locations. For example, Toutiao, QQ browser, Douyin, etc.
Advertiser (agency): In essence, it is actually an intermediary, helping advertisers find media advertising spaces and helping media find advertisers
Audience: People who "consume" advertisements, namely consumers and users.
2. Billing method:
CPM (Cost Per Mille) , that is, the cost of a thousand advertisements. Because the cost of each display is very small, the industry has agreed to charge according to the form of 1000 advertisements. Pay-per-click ads are mostly based on brand display and product launches, such as WeChat Moments ads. The exposure effect is usually better.
CPC (Cost Per Click) , which is billed according to the number of times the advertisement is clicked. Keyword bidding and information flow advertising are mostly this model.
cpa (cost per action) , that is, billing according to user behavior, generally registration behavior, registration cost. It also includes CPD (CostPer Download) cost per download and CPI (Cost Per Install) cost per installation
cps (cost per sell) , that is, pay according to sales, direct performance marketing advertising. For example, in a mobile game, a user recharges a certain amount for a valid sale. No access to the channel SDK, only one game package for the channel, divided into the channel by cp
CPP (Cost Per Purchase) , the cost of each purchase, refers to the settlement according to the number of transactions. Only after the user clicks on the advertisement and makes a transaction, the advertising site fee is paid according to the number of transactions. The difference with cps is that cpp is based on the order quantity, cps is the order amount, generally cps is mostly used
CPT (Cost Per Time) means that the cost is displayed according to a time period, generally 1 day, 1 week, and 1 month. Buying out the display of the advertising space for a period of time at a fixed price is called the most worry-free delivery method. Most platform parties through CPT is the fastest and most effective way to make money.
3. Other terms:
Ctr (Click- Through Rate) click rate,
CVR (click value rate) refers to the conversion rate of an advertisement.
Consumption: Cost (for example, in cpa mode, 1000 yuan to get 100 users, the cost is 10)
ROI: (Return on investment), refers to the input-output ratio, that is, the percentage of the value that advertisers recover through advertising in a certain period of time. Values greater than 1 are profitable. That is, total sales revenue/total consumption (ie advertising costs)=LTV/total cost=average paid amount of registered users/CPA
LTV (life time vaule) refers to all the value the user brings to the advertiser during the life cycle of the advertiser's product. For example, the income brought by users in the current month, the next month, ..., the nth month, the total is LTV
eCPM: (effective cost per mile) , thousand impressions revenue, is an indicator for the media to measure the efficiency of their own advertising production. It refers to how much advertising revenue can be brought to the media for every thousand advertising exposures. The larger the value for the media, the better. eCPM=CPC×CTR×1000
UV independent visitor : N visits to a computer within 24 hours count as 1
PUR payment rate = number of paid people / number of registered people
Number of retained users : retained users refer to users who log in again within a period of time in the future. Generally, it is also the number retained for the next day, the number retained for seven days, the number retained for 30 days, and the number retained for 60 days. Retention rate is a key indicator of game quality
Retention rate : the percentage of the number of retained users to the number of registered users imported into the advertisement within a specific period. Retention rate = number of retained users / registration volume * 100%
Number of active users : users who log in again within a period of time or log in multiple times in the next few days;
ARPU (Average Revenue Per User) average revenue per user : refers to the average revenue contributed by each registered user in a specific period. The total paid amount divided by the number of registered people
ARPPU (Average Revenue Per Paying User) average revenue contribution per paying user
: The average payment amount of paying users in a specific period. Total paid amount divided by number of paid people
Retention cost: the acquisition cost of a single retained user; retention cost = consumption/number of retained users;
Active cost: acquisition cost of a single active user; active cost = consumption/number of active users;
Paid cost: acquisition cost of a single paying user, paid cost = consumption/number of paid users;
Three, CPM formula derivation
1. Basic logic
Regardless of CPM, CPC or subsequent CPA, OCPM, oCPC, double bidding and other bidding modes, most media platforms finally convert the bids into eCPM according to the conversion formula, and then sort the eCPM and select the advertisement with the highest eCPM. To show. In this way, the revenue of each display opportunity of the media can be measured directly and its own interests can be maximized. Therefore, most of the bidding points of each advertiser are still at M, but the bidding point and the charging point are different. eCPM is a measure of the profitability of one's own advertising from the perspective of media, which can be decomposed into the product of click rate and click value. eCPM=CPC×CTR×1000
-CTR: Click-through rate, which describes the behavior that occurs in the media
-CPC: Click value, that is, the revenue that a single click brings to the advertising product
2. Conversion between billing methods:
In the process from display m→click c→download i→register to activate a→pay p, the price of each action is equal to the price of subsequent actions multiplied by the probability between the two. E.g
CPM=p(m→c) *CPC * 1000=CTR*CPC * 1000
p(m→c) refers to the probability between impression and click, that is, click rate
3. CPM formula
cpm = p(m→p)* estimated paid bid*1000 = p(m→p)* estimated paid bid*1000=click rate*conversion rate* estimated paid bid*1000
CPM formula example: Suppose we are promoting a game, and the acquisition cost of a paying user through accounting is less than 80 yuan, and the income brought by the paying user is greater than the acquisition cost, so you can make money. In other words, the advertiser has an estimated paying user bid, which is 80 yuan. Then the advertiser will estimate the probability from p(m→p) based on the previous delivery data, assuming the estimated click-through rate CTR (m→c) is about 0.03, the download rate p(c→i) is about 0.1, and the registration rate p(i →a) is about 0.4, the payment rate p(a→p) is about 0.1, then the whole p(m→p) is 0.03*0.1*0.4*0.1=0.00012, so
cpm = p(m→p)* implied paid bid*1000 = 0.00012 *80 * 1000 = 9.6 yuan
So the advertiser’s CPM bid is set at 9.6 yuan.