You need to know two metrics in order to calculate CPE, total number of engagements and the total costs. The formula, CPE = total engagements/total cost can then be used.
Did you know that there are more than billions of websites currently active on the internet? With so many websites out there, it can seem impossible for your website to compete, let alone succeed. But there is a trick to making your online brand successful and that trick has to do with advertising.
Cost per engagement (CPE) advertising in particular is a very good way of advertising and keeping track of how much money you're spending on your advertisements. This method is unique to other advertising methods such as cost per click or cost per acquisition, but what makes CPE so special in the first place and how does it work?
Keep reading and learn more about the advertising logistics behind cost per engagement advertising.
What Is Cost per Engagement Exactly?
All good ads require money to run. You as an advertiser will need to spend a certain amount of money on advertisements so that you can direct more internet users to what you have to offer whether that be an online service, a product, or anything else. The problem is that advertisements don't always work.
Some people might see your ad but might not interact with it in any way. This, of course, would not help you grow your online brand at all because the ads you're running aren't actually generating any new traffic or potential customers. Of course, you won't want to spend money on ads that aren't doing anything to help you grow your brand.
Fortunately, most ads, including CPE ads, are designed in a way that you only pay for them under very specific circumstances. In the case of CPE, you would only pay for an ad when a user interacts with your ad or a piece of advertised content in some way. You might be wondering which way a user would have to interact with your ad to produce this result.
It can change depending on what style of advertising you're using. Suppose that you're running a short video to advertise a product or service your business has to offer. Many people might let the video run until it's over without interacting with it in any way which would not benefit you much.
On the other hand, someone might decide to pause this advertisement video.
CPC vs CPE vs CPA vs CPM?
CPE calculates the cost of someone engaging with your ad (in any way) vs CPC which only measures the cost per click. An engagement may mean different things on different social media platforms, it may have one definition facebook and another on Twitter. It can mean someone hover, likes, shares, comments or saves your content. CPA on the other hand calculates the cost of acquiring a user (often the cost of purchase) and CPM is the cost per 1000 impressions of your ad. Each pricing model presents a different metric to optimise for and all can be used to tailor campaigns in slightly different ways. It can be useful to seek out the industry benchmark for you niche to understand where your costs compare to the average.
Types of User Engagements
Pausing the video counts as a user engagement even though it is a very slight form of engagement. Even though it counts as an engagement, it might not necessarily produce a beneficial result for your business.
The person who paused the video might unpause it and let it finish without interacting with it further. Again, this wouldn't help you much, but it would still count as an engagement. There are also much more meaningful user engagements such as a person clicking on the link in your advertising video.
This link would lead to your website. The person who clicked on the link may end up filling in their contact details or they may be interested in purchasing one of your products or services. This, of course, would be a very meaningful user engagement and it might even lead to a new customer.
Unfortunately, not all user engagements can be so meaningful, but in general, it's a good thing whenever someone interacts with your content or ads. When a person interacts with your ad, you will need to pay a specific price for that ad to run. But how much is CPE advertising and how can you know whether or not you're getting your money's worth?
Fortunately, there is a formula that makes calculating this very easy which we will explore next. We will also explore why cost per engagement advertising matters in the first place.
Why Does Cost per Engagement Matter?
The first thing you should know when it comes to CPE stats is that the cost of CPE, in general, is your total cost of advertising divided by the total number of engagements those ads receive. But what does this mean for you exactly?
Suppose that you spend a whopping $10,000 on some specific advertisements to bring more business to your website. Out of all of that advertising power, you end up with around 1,000 engagements from different people. Some of these engagements may have been meaningful (the user went to your website by clicking your link) or not meaningful (a user paused or muted your video, for example).
Whatever the case, if you take 10,000 and divide it by 1,000, the answer will be 10. This means that the value of every engagement for your ads will be worth $10. But what does this really mean for you and your business?
How can you know if the money you're spending on advertising is really worth it? First, you will need to know that you won't always have to spend $10,000 to bring traffic to your website with ads. Depending on what you want to accomplish with your ad campaign, you may want to spend much more or much less than that number.
Understanding the Analytics Behind CPE Advertising
In fact, many people who use cost per engagement as their chosen advertising method don't have to spend much money at all to see impressive results and analytics. This is important for those who are new to advertising and don't want to spend a lot of money right away. This method of advertising is also important for analyzing user behavior, especially if you are targeting a very niche group of people.
After using cost per engagement ads for some time, you will have the opportunity to look back on the analytics that these ads produced. Even if you didn't make a lot of money with these ads, you can still use the information gathered to find ways to improve your advertising strategies. For example, you might discover that your target audience prefers video ads instead of banner ads or pop-up ads.
On the other hand, you might discover that your audience prefers humorous ads rather than serious ads. Whatever the case, CPE ads are very important for not only making money but better understanding your users as well. This, of course, is great news because you'll then have the chance to create more ads that should better target your audience than ever before.
This will improve the chances of your users interacting with your ads in a meaningful way. But what are some of the other positive results you can expect to see from this mode of advertising?
What Is a Good Result From CPE Advertising?
One of the greatest results of cost per engagement advertising is that you can save a lot of money when advertising in this way. Suppose you have just launched an online business of your very own. Because this business is so new, it won't yet have a lot of traffic or new customers and you won't have a lot of money to work with as a result.
For that reason, it would be impossible to run a huge advertising campaign that might cost you thousands, if not tens of thousands, of dollars. While such a huge ad campaign might be very helpful for reeling in new customers, it wouldn't be feasible for such a small business. Many new business owners believe that for that reason, there is no hope for advertising until their businesses start to grow on their own.
But this simply isn't true. By using CPE ads, you don't have to spend much money at all to start seeing meaningful results. If you're not willing or not able to spend much money when just starting off with your business, you'll only need to pay a few dollars or even a few cents to get a few ads running. Of course, such a small contribution might not produce dramatic results, but the small-scale results will still be better than nothing.
Spending a small amount of money on advertising is also important if you're not sure whether or not CPE advertising is going to work for you and your business. In a way, starting small with CPE ads is somewhat like a trial run for advertising. After you are finished running the ads, you can look at how successful (or unsuccessful) they were after a given period of time.
Types of Positive CPE Ad Results
Even if the ads were unsuccessful, you won't be risking much with CPE ads. The worst-case scenario is that you might lose out on a few dollars or so. In that case, all you have to do is adjust your advertising campaigns and try again.
But the positive results of this kind of advertising don't stop there. CPE ads can show you what kind of engagements you're getting from your users. You might be surprised and find that your ads are very effective for your target audience which would result in plenty of meaningful engagements.
Users might sign up for your newsletters, type in their contact information, buy a product from you, or sign up for one of your services. Whatever the case, these engagements would certainly be worth whatever you ended up paying for them. On the other hand, you might end up being somewhat unlucky and only end up with engagements that don't do much to help your brand.
In this case, you would be spending money on ads that aren't really doing much to further the success of your brand. This might make you wary of advertising with CPE, but you shouldn't be. That's because there are many ways in which you can improve your results which we will explore next.
How to Achieve a Better Result With CPE Advertising
When paying for advertisements, you will always want to analyze what kind of ads and what types of user behavior provide you with the most profitable results. This is especially true for cost per engagement ads. For example, banner ads might intrigue your target audience the most and therefore would have the most profitable results.
This can help you create ads that your target audience will be interested in engaging with. For example, suppose that your online brand sells sparkly lipstick. Marketing analytics can help target users who are in the market for this kind of product.
By then targeting this group of people with ads for your own product, these users would be much more likely to click on your ads and explore what your website has to offer. As you can imagine, this would be much more effective compared to dishing out your ads to random groups of people.
Keep in mind that CPE advertising won't necessarily make your brand a success overnight. As with any kind of advertising, it will take some time before you start to see real results, but the time it takes will be worth it.
What You Need to Know About Cost per Engagement
Needless to say, cost per engagement (CPE) advertising is a very useful type of advertising for a variety of reasons. For one, it is cheap and ideal for businesses that are just starting out and don't have money to waste. It is also effective for analyzing user behavior and profiting from certain types of behavior.