What is the Cost of Advertising for D2C eCommerce Apps?

The cost of user acquisition for D2C eCommerce app advertising has fluctuated throughout the year, steadily increasing since summer as we headed into the holiday shopping season. In general, D2C eCommerce apps have had a big year of growth as people stayed home and moved their shopping online. In fact, it was reported that Cyber Monday was the biggest mobile shopping day in US history with more than $11 billion in revenue.

More online shoppers are turning to their mobile devices and their favorite retail apps to browse and buy, so competition for users via app advertising is fierce. This is because D2C eCommerce providers are competing with traditional retailers that have eCommerce apps (ex. think a popular consumer brand like Lacoste competing for app-based shoppers with big retailer Nordstrom). With a D2C eCommerce apps strategy, the biggest challenge for manufacturers is having to compete with retailers. Retailers already have experience in selling to consumers and a good understanding of their clients and the retail market. In the mobile app market, this means fierce competition for acquiring mobile app users.

What is the cost of advertising your D2C eCommerce apps for mobile? Well, there are many different variables.

It can depend on the advertising channel (Facebook v Google v TikTok, for instance) as well as the following:

We will break down how each of these impacts the D2C eCommerce app advertising cost below.

 

Types of Ad Objectives and How they Affect D2C Ecommerce Apps Advertising Cost

 

Within advertising platforms, there are typically different objectives (goals) for you to choose from. Each goal, and each type of ad:

  • Has different KPIs
  • Is shown to different people based on the outcome you want

The objective you choose determines who sees your D2C eCommerce apps ads, which can drastically affect your advertising cost.

Example: Imagine that you, a movie streaming service provider, are starting a new app campaign. You have set your targeting to include people who are film and TV buffs.

Now imagine that the advertising platform needs to choose between two people to show your ads to, both of which match your targeting. The first person is very “clicky” (clicks on a lot of ads) but never completes a lead form. The second person does not click on a lot of ads at all but tends to fill out lead forms when they do click on one.

If your objective is to get traffic to your website, the ad platform will choose the “clicky” person to show your ad to. If your objective is to get installs, the platform will choose the person most likely to convert.

Chances are, there are fewer people who are likely to install an app than people who are likely to click on a website. Case in point: The smaller your pool, the more the advertising cost rises (except in highly targeted, highly relevant campaigns, like showing a superfan of Harry Potter ads for a discount to purchase and stream the film series). Choosing the right ad objective is the first step in making sure your D2C eCommerce app advertising cost stays low.

 

Types of Ad Objectives

 

  • Awareness: Ads with the Awareness objective build top-of-mind awareness and interest in your D2C eCommerce apps.
  • Consideration: Ads with the Consideration objective get people to start thinking about your D2C eCommerce apps and look for more information about them.
  • Conversions: Conversion ads encourage people to carry out a specific action or purchase your service.

 

How Ad Auctions Work and How it Affects Advertising Cost

 

The second factor that plays into how much D2C eCommerce app advertising cost is the auction and your bid. Unfortunately, the advertising spot does not go to the highest bidder and instead is presented based on ad value.

Ad platforms often strive for two things when showing ads:

  • Creating value for advertisers by helping them reach and get results from people in their target audiences
  • Providing positive, relevant experiences for people

The best way for us to do this is to hold an auction in which both interests are represented. That way, advertisers are reaching people receptive to their ads and users are seeing something they are interested in. This is different from a traditional auction because the winner is not the ad with the highest monetary bid, but the ad that creates the most overall value.

What goes into that value? Three things:

  • Advertiser bid – Your monetary bid.
  • Ad quality and relevance – This is based on feedback from the platform’s users and how relevant it is believed your ad will be to the people seeing it.
  • Estimated action rates – This is calculated by how likely the ad platform thinks a person is to complete the objective you have chosen.

During the ad auction, your ad is pitted against other similar ads, and the advertiser with the highest combination of all three gets that online real estate.

 

How Your Bid Can Affect D2C Ecommerce Apps Advertising Cost

 

There are two ways to bid for your ads, Automatic and Manual.

With Automatic bidding, the ad platform sets your bid for you to get the most actions for the best price. With Manual bidding, you decide what a result is worth to you. Platforms always encourage you to bid true to what the action is worth to you. And focus on ROI instead of the lowest advertising cost. The higher your bid, the more access you may have to the people that matter most.

 

Your Audience and How it Affects D2C Ecommerce Apps Advertising Cost

 

The audience you choose to show your ads to have A LOT to do with your end D2C eCommerce apps advertising cost. The more relevant your audience, the lower the advertising cost. Think about it this way:

You are a live streaming site for esports that attracts gamers. You want to run an ad to drive audiences to watch an upcoming esports event, so you choose to target people who are interested in games.

Good idea, right?

Wrong.

If you only select “Interested in games” as a qualifier, your ads are going to be shown to EVERYBODY who has ever indicated they like games. This includes people who are not interested in esports because they are casual gamers, do not play very often, or don’t like to watch live streams, etc.

Now the bad news: there are more than 350 audience attributes you can select and combine, and it takes years of perfecting your technique to manipulate them into killer audiences.

 

Ad Quality and How it Impacts D2C Ecommerce App Costs

 

If I were going to say you must pick two things to optimize to lower your advertising cost, Ad Quality would be the first on my list, followed by Audience.

Your ads need to be interesting, visually appealing, and they absolutely must fit one of these criteria:

  • Pique a user’s interest
  • Invoke an emotion
  • Jolt someone into action

An image with your logo and a headline will not cut it. You need to invest in creating high-quality creatives at scale.

You can read more about our creative concepting and testing best practices here.

 

How Your Industry Affects Advertising Costs

 

Let us think about this logically. If you are selling Rolex watches, your advertising cost per result will probably be higher than if you are selling a 30-day video streaming trial. The industry you are in and the product you are selling has a lot to do with your advertising cost.

 

The Best Way to Lower Your Google Advertising Cost? Hire Someone Who Knows How to Do It

 

To get the most in performance from your D2C eCommerce app advertising, you need to ensure you work with a knowledgeable marketing partner and you need to do extensive quantitative creative testing. This is essential for user acquisition campaigns now. While the algorithms may be able to test creative elements, they cannot create those elements or develop a creative strategy. They cannot do competitive analysis alone, either.

Focus on expanding your skills in the areas of creative development and testing. Specifically, being able to distill and interpret split testing data from creative so your team can deliver better creative. Feel free to reach out to us anytime with questions.

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Photo by CardMapr on Unsplash

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