A Method for Calculating Your Cost Per Engagement (CPE)

Cost Per Engagement (CPE), or in the case of a sponsored post the “cost per read,” can be a useful and less well-known benchmark when evaluating the correct price for a custom sponsorship, but there are certain factors to take into consideration when using this method.  The good part is that you can calculate your estimated engagement rate for a sponsored post for example pretty easily.  Just take the number of average or median views each post gets and divide it by the number of of total website views (if you already have sponsored posts take the average of those).  The hard part is coming up the the price per engagement. The industry price range is a lot more volatile than say a CPC bid on adwords, so it may be seen as rather subjective.  But thankfully, CPV bids on Youtube do provide for somewhat of a guideline in terms of demand for what people and brands are willing to pay for engagement rather than click-throughs or impressions.  To clarify if unfamiliar, on Youtube you can bid on Cost Per View (CPV), where you set real time bids for a minimum viewing time of a promoted video.  CPV could be considered a subset of CPE. These bid rates really depend on which demographic you are targeting, as well as the context and quality of your video, but can range from 2 cents to a couple dollars (CPV Google Reference).  Below let’s take a look at a couple examples.

Examples of Estimated CPV on Youtube vs. Estimated Keyword CPC from Google adwords:

CPV vs CPC Examples

As you can see for these four different examples above, the CPV bid price ranges anywhere from a third to a fifth of the CPC bid price.  You should check out your own average CPVs and CPCs for your audience and keywords if you haven’t, it takes just a minute.  Now let’s use the bid data for one of the target markets above to go through an example:

CPE model, CPE pricing, Native Advertising Model

If we did the same for “Make Money Online,” we would come up with $2,250 and so on.  This should be taken with a grain of salt, as CPE may not even be relevant for pricing certain types of native ad units such as a custom background skin, where the standard CPM would make more sense.  It can be useful though when considering sponsored posts or videos.  At the end of the day, the choice really comes to what the publisher feels is fair for them, yet appealing to an advertiser, and at what price advertisers will benefit and become a return customer.  Hopefully this basic pricing strategy is a useful guideline for certain custom units that need to be based on something other than CPM or CPC, or if you are just beginning to test your native ad strategy.

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