The three high-level objectives that a media company should focus on are Cost Per Acquisition (CPA), Lifetime User Value, and Session Value. All three of these KPIs are upheld by the three pillars I propose in my this article. While session value is a major component of lifetime value, it’s important on its own as a standard for medium & short-term goals.
Cost Per Acquisition (CPA) Objective
This is an important objective not just because it’s a very popular way to value a company, but it is also a good way to gauge at how quickly you can grow and at what margins. Usually, CPA will increase as you try to increase the growth rate. That is, let’s say you are growing by 50% YOY at some cost, but you would like to acquire users even faster, that cost would increase. Below I show a figure that outlines this CPA growth relative to the growth rate. As you exhaust the cheaper traffic (acquisition) sources such as your internal pages, your costs might increase as you start going after external influencer networks, and even more so as you consider doing ad buys. Even when purchasing traffic through influencer networks, there are cheap sources and more expensive sources.
For many publishers, CPA is derived from (or mostly comprised of) the cost per click metric. However, it’s important to factor in all the costs associated with getting users to the publisher’s page. For example, if you’ve got a $7 CPC (per 1000) on a deal, but it took you $20K to close that deal, it’d be prudent to estimate the lifetime total clicks of that contract and add it on a CPC basis.
If a publisher has merchandise or a subscription, then it’s important to also talk about the cost of conversion, but that’s being the scope of this article.
CPA Key Results
Thus, anything to push this curve down (fig 1) are key results goals to consider:
- Virality of content – How many people re-share your content/ experience on their own without payment. Supported by 3 Pillars.
- Decreasing cost of growing your internal pages
- Increased reach on your social media pages–domain score, public page score, etc.
Lifetime User Value (LV) Objective
The LV is a multiplication of session value and the number of return visits in a particular time frame. The “lifetime” period for an online publisher should be considerably smaller than a brick and mortar store, but it would be unique to any business.
Ultimately the most important factor to consider here is anything that will bring the user back (on their own) during their lifetime interaction with your product (since the monetization variable is covered by session value).
LV Key Results
Factors that can affect a user’s likeliness to return to the platform on their own are the key results to focus on:
- Brand and brand awareness
- Growth of organic traffic
- User Experience and 3 Pillars.
Session Value (SV) Objective
This should be the gold standard objective (KPI) for monetization because it takes into account engagement and average RPM. That is, session value is average RPM (per pageview) multiplied by page views per session. If you focus too much on RPM, then you might not get as many page views per session, and if you focus too much on RPM then you may lose pageviews by overloading pages with ads. If you aren’t on a pageview model, it’ll be your average CPM times the total number of fulfilled ads shown per session. Ultimately, session value is a measure of how well you do with every person you bring onto your platform. It’s also the other major way to push the lifetime user value up.
SV Key Results
Engagement of Active Users that drive ad views per session. Use the three pillars to drive this objective (KPI):
- Authentic Engagement
- Content Matching
- Content Repurposing
CPMs and average RPM:
- Audience value based on geography, purchase intent, and income
- Viewability and view fraud management
- Programmatic ad tech and SSP partnerships
- Direct-sold: Strong targeting, insights on your audience.
These OKRs give you the necessary tools to make informed business decisions based on your priorities.
Based on figure 1 above, a business should never pay beyond bc for traffic since those costs can never be recovered. The business knows that anything between bc and ac will impact margins and short-term revenue negatively, and should only be considered if you want to focus on rapid growth and have the cash on hand to pay for this traffic. We also know that any increase in growth rate is safe below ac, but we eat into our margins as we increase it.
Based on current short term and long term goals, we can make an informed judgment what to focus on. Session value is usually one of the most important objectives because it’s the one where we can have the most impact and the one that also raises lifetime value by some multiple. The CPA curve is probably hardest to affect, but sometimes there are some quick wins like increasing the reach of your internal facebook pages.