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CPA, CAC and Customer Acquisition costs

By on December 8, 2011

The costs of acquiring customers for Facebook, browser and mobile games is soaring. At the same time, virality is ever more elusive as Facebook shuts down spam messages and mobile has still not harnessed the social graph on a technical level (although word-of-mouth is still very effective).

The cost of acquiring a customer (often called CPA – Cost Per Acquisition – or CAC – Customer Acquisition Cost) is definitely rising. But how far?

That’s a very difficult question. Not least because the difference between CPA and effective CPA (eCPA) is so critical.

What is the eCPA of a social, browser or mobile game?

CPA is the amount you actually spend on acquiring a customer. Let’s imagine you use some sort of affiliate or CPI (Cost Per Install) scheme where you pay $1 for each user who registers for or installs your game.

So the CPA is $1.

But what about virality? Word of mouth? PR? How much does it really cost you to acquire a customer?

eCPA is often thought of as being the cost of acquiring a customer and all of the friends that they bring. So eCPA is generally lower than CPA, and is a function of the amount you pay to acquire a customer and the effectiveness of your viral channels. This shows how virality works to reduce your marketing budget, but also emphasises that you will need to seed your channels with marketing spend to kickstart the process.

The problem with eCPA is that it can be hard to measure. So there is another way.

What is the total marketing spend for a mobile, browser or social game?

A different way to look at eCPA is the catch-all approach.

Into your costs, throw in everything: PR spend, the marketing person, the cost of producing trailers, videos, press releases and assets, everything.

Then look at how many new customers you got that month. Divide one by the other and hey presto, total eCPA.

What should I use as a benchmark?

That’s a very difficult question. My guess is that most people who talk about the cost of acquiring customers are referring to the actual cash payment to a marketing partner for delivering a customer.

So when looking at the benchmarks below, I would assume that these are CPA, not eCPA figures.

Benchmarks

  • Chartboost finds average cost per install between $0.94 (Google Play in the UK) and $2.79 (iPad in France) (source, May 2014)
  • Fiksu cites an average CPA for users who open an app more than three times of $1.52. Average CPIs on iOS are $1.24 and on Android are $1.31. (source, April 2014)
  • Tapjoy gives a case study of their ‘video plus install’ program with the game Battle Command! and cites an eCPI of $1.57 (source, May 2014)

2013

  • CPI for Facebook mobile ads may be $7.50 according to Jussi Laakkonen (source, April 2013)
  • Chartboost have average cost per install at $1.80 for iPhone, $1.68 for iPad and $1.68 for iPod touch (source: Video Games Intelligence, March 2013)

2012

  • On-Net Europe, CPA of €1-5 for ‘real users’ who log into the game (Source: Twitter, May 2012)
  • At Game Horizon 2012, Torsten Reil announced that CPAs on iOS have not risen to $1.80
  • Positech, CPA of $0.50 for visitors who spend at least one minute on their site (Source: Twitter, May 2012)
  • Fiksu’s cost per loyal user index has average CPA for a mobile user opening an app at least three times at $1.30 for March 2012, after reaching an all-time high of $1.81 in December 2011

2011

  • “Users are expensive and it costs $2 to $3 to acquire each one” – Rick Thompson, former Chairman of Playdom, AllThingsD, October 10th, 2011
  • On Kixeye the cost per acquisition is $4 – Social Games Summit, November 14, 2011

About Nicholas Lovell

Nicholas is the founder of Gamesbrief, a blog dedicated to the business of games. It aims to be informative, authoritative and above all helpful to developers grappling with business strategy. He is the author of a growing list of books about making money in the games industry and other digital media, including How to Publish a Game and Design Rules for Free-to-Play Games, and Penguin-published title The Curve: thecurveonline.com