Some of you have heard the term "eCPM decay." Let's first understand what it means. If you are a publisher, CPM is the revenue you are getting for 1,000 impressions. If an advertiser is paying you a CPM of $5 and you show your users 1,000 impressions of that ad, you will receive $5. The advertising world is slightly more complex, however; most of the advertisers are actually paying CPI -- in other words, they are paying for installs. This means that unless the user clicks on an ad and installs the app, the publisher doesn't receive any revenue. What eCPM decay means is that if you take a certain user and show him more ads, he is not necessarily going to install more apps, so you wouldn't receive more money as a result.
Simple Example of eCPM Decay
Let's think of this scenario:
- You have a single user in a given day
- He wants to get 1 life for free, so he watches a video -- you as a publisher don't get paid for that
- Let's say the chance of him installing the app is 1% -- if he does you get $5
- The eCPM for the first impression is $50 (1,000 x 1% x $5)
Let's now consider another scenario:
- The same user already watched 9 videos, and now he sees the 10th one in the same day
- By the time he reaches the 10th ad, he is already blind to the ads, and the chance of installing is 0.2%
- The ad network can't show the same ads to this user, so now he sees ads for apps that pay less -- let's assume $1 per install
- The eCPM for the 10th impression is $2 (1,000 x 0.2% x $1)
What About RTB?
Some of the ad providers you might integrate are utilizing real-time bidding. This means that the price for every impression is determined by the marketplace in real time. If you look at the logs of the SSP or your mediation provider, you will actually see how the CPM bids decline from impression to impression. What happens behind the scenes is that advertisers are doing the same math we did in the example, so they are bidding higher on 1st impressions compared to later impressions. Machine Zone, for example, is known to pay a high CPM but demands that their ads only show up as a first impression to the user.
Why the Decay is Stronger with Rewarded Video
If you measure your eCPM decay with an ad revenue tracing platform like SOOMLA TRACEBACK, you will see that the eCPM decay is stronger with rewarded video ads compared to other formats. The reason for that is the misalignment of incentives. The user gets rewarded for watching the video while the publishers mostly get paid for installs. You might want to check this article about rewarded video payout for more details.
Mediation Helps a Bit with CPM Decay
If you use an ad mediation provider, you can improve the situation to some extent. By aggregating more ad providers, you are creating better fill rates and getting a larger variety of advertisers that can pay higher CPIs. By having more variety, you also reduce the blindness of the user to the ads and improve the chances a user will end up installing and generating revenue for you.
If You Can't Fight Them, Join Them — Focus on 1st Impressions
CPM decay is here to stay, but instead of fighting it, there are ways to make the situation work to your advantage. If 1st impressions pay 10x more, why not focus on having as many 1st impressions as possible? Using an ad tracing platform like SOOMLA TRACEBACK reveals that most mobile games have between 10% and 40% opt-in ratios. This means that at least 60% of the users don't watch even the 1st impression. Getting more users to opt in means you will get a lot more of these high-paying impressions and can double if not triple your revenue.
Kongregate allows guest posts for topics we find interesting and relevant to our developer community. Guest posts can be created by developers or third-party companies, and all content is subject to review. A guest post does not imply any business relationship, use, or endorsement of any persons or products between Kongregate and those of the author.