Calculating the value of AR integrations

Digital advertising

Advertising is an important element of any business's marketing strategy, but how do you measure its effectiveness and understand if it is useful enough? 

One of the most common methods of measuring the value of advertising is by using various metrics such as CPM, CPV, and many others. In this article, we will discuss these metrics and explain how they are used in the advertising industry. You will learn what CPM is and how it relates to traditional media advertising, as well as other metrics such as CPC, CPL, CTR, and many others.

In the Social-AR industry, the same laws apply as in orthodox advertising. However, there is one significant advantage: one effect can combine several types of integrations at once: static, video, immersive, as well as user-generated content.

We have noticed that nobody is highlighting the topic of AR advertising effectiveness across the entire internet, so we decided to propose our model for evaluating the value of such campaigns.

There are many metrics used in the advertising industry to measure the effectiveness of advertising campaigns. Here are some of the most common:

• CPM (cost per mille) - the cost of advertising per 1000 impressions. This metric is often used in online advertising, especially in contextual and banner advertising.

• CPV (cost per view) - the cost of advertising per one view. This metric is used in video advertising, where every view of the video is paid for.

• CPC (cost per click) - the cost of advertising per one click. This metric is used in contextual advertising and other forms of advertising where the goal is to redirect users to the advertiser's website.

• CPL (cost per lead) - the cost of advertising for each lead received. A lead is a potential customer who has provided contact information, such as by filling out a form on the advertiser's website.

• CTR (click-through rate) - the percentage of clicks on an advertisement relative to the number of impressions. This metric is used to evaluate the effectiveness of contextual advertising.

• CPA (cost per action) - the cost of advertising for each completed action. This metric is used to evaluate the effectiveness of advertising where the goal is to perform a specific action, such as purchasing a product or subscribing to a newsletter.

• Social engagement rate (SER), which reflects the total number of interactions with content, such as likes, comments, and reposts, relative to the number of views or completions of the content. SER can be useful for determining how actively users interact with content on a page, as well as for comparing the effectiveness of different campaigns and types of content on social media.

• TSI (Time Spent in Integration) - is a metric that measures the total amount of time users or systems spend interacting with a specific integration or platform. It helps assess the engagement level and efficiency of using integration tools, APIs, or applications, providing insights into how extensively users utilize integration functionalities.

• UGC (User Generated Content) - this is a metric used to measure the effectiveness of user-generated content. It refers to content that has been created, published, or disseminated by users on social media, websites, or other platforms.

• ROI (return on investment) - the ratio of profit to advertising costs. This metric is used to evaluate the effectiveness of an advertising campaign as a whole.

These metrics help advertisers and marketers evaluate how effective their advertising is and determine what changes are necessary to improve their results.

To calculate the value of AR integrations in dollar terms, we need to understand how to calculate these parameters.

Sure thing, we have a general understanding of the metrics. Let's calculate them using an example of AR integration on TikTok.

In case if any platform provide possibility to add clickable link in effect, we can also imagine how it valuable could be:

Average Click-Through Rate (CTR) 

• Instagram: Average CTR 0.50% - 1.50%.

• Facebook: Average CTR 0.90% - 1.60%.

• TikTok: Average CTR 0.50% - 1.00%.

  Average = 1%

Here are approximate average costs per click (CPC) on various platforms:

• Google Ads: $1-2 per click

• Facebook: $0.50-1.50 per click

• Instagram $0.50-1.50 per click (as part of Facebook Ads platform)

• Twitter: $0.50-2 per click

  Average = $1.19

CPC ~ 10 000 000 * 1% * $1.19 = $119 000

AR Effects cost starting from $5000 for basic effects up to $50 000 for complicated project such as mini-games, etc. 

Let’s say, average cost ~$25 000

AR ROI =  ($50 000 + $119 000 + $2 400 000) / $25 000 = 100,276% !

Ofcourse, campaigns can be different:

Important: one of the most valuable insights gathered from all platforms supporting AR is that gaming mechanics gather the most activity.

Cost Per Action

The formula to calculate CPA is:

CPA = Total Advertising Costs / Number of Actions Completed

For example, if an advertiser spent $1,000 on an ad campaign and received 50 registrations, the CPA would be calculated as follows:

CPA = 1000 / 50 = 20 dollars

Average CPA on Instagram, TikTok, and YouTube

The cost of CPA varies depending on many factors, such as the business niche, geographical location, target audience, competition, and the quality of the ads and landing pages. Approximate average CPA costs in 2024 are:

1. Instagram: Average CPA ranges from $5 to $20 per action.

2. TikTok: Average CPA ranges from $1 to $10 per action.

3. YouTube: Average CPA ranges from $10 to $30 per action.

If you use call to action in AR integrations and also allow the advertiser to track user actions on the target website, this can serve as an additional return on investment metric

Comparison

To better understand the value of AR integration, let's compare this statistic with Super Bowl advertising. The Super Bowl is the largest platform for advertising, reaching 200 million people, but it can cost up to 7 million dollars for a 30-second ad.

The average time spent by a user on a story is up to 15-30 seconds, and a well-executed AR effect can reach millions, or in some cases, tens of millions of people. Based on this model, such coverage is equivalent to an investment of $200,000 - $400,000 in advertising.

Example:

Why does Social-AR work?

One of the main rules of marketing is to give the user what they want. What do brands and their marketing departments want? Quality integrations and large audience reach.

But what does the end user want?

This is the most important point - the user wants two things:

• Interactivity

• Social approval (views, likes, comments)

A well thought-out creative solution satisfies at least one of these needs.

Thus, we have a connection: the user satisfies their need -> gets engaged and spreads the experience through reposts -> creates reach for the brand.

This mechanism leads to the desired result, and we have a win-win situation!

I want to draw the attention of brands, marketing agencies, and developers to this thesis, as it forms the value of AR solutions.

The future of Social-AR

Currently, the market is such that AR effects are mainly used by large brands with large advertising budgets. But there are several reasons why this has happened and several things that will change soon:

• Very few studios that provide commercial-grade AR services

• The topic is quite "boutique" due to its "technology", although the AR theme has long captured the minds of users, and most know what it is

• Very few publications explain the real value of such integrations

What should change:

• The potential consumer market for AR integrations will emerge from the shadows - thousands, tens of thousands of brands that communicate with their audience through social networks Instagram, TikTok, Snapchat will implement this as one of the main tools.

• AR experience quality: the number of studios that serve this industry is growing, and those who have long been in the industry are setting a new standard for quality.

• The cost of AR integration: as demand and supply increase, many quick solutions will appear that will lower the entry threshold for small advertising budgets.

• Also, the AR/VR market is forecasted to grow from $37 billion to $114.5 billion between 2022-2027, which is more than tripled in 4-5 years. (according to www.marketsandmarkets.com)

Summary 

The trend curve is in front of you: all technological innovations develop along this curve.

To understand it is quite simple:

1. First, there is the invention of a new technology - this is the trigger.

2. Many players start experimenting in the new direction, investors pump money into the topic, and the trend inflates.

3. After testing many hypotheses that do not work, interest from the majority of "gold diggers" wanes, and people abandon the niche en masse. 

4. The remaining players who have been driving trends all along do not give up and gradually find real applications for the technology that brings in money or saves costs in existing businesses.

5. Gradually, the niche stabilizes, is fully integrated into the existing economy, and becomes a clear and predictable business.

At present, the social-AR theme is on the threshold of the fifth, final stage. What does this mean? It means that social-AR will soon be firmly established as a communication method and will become a standard tool for marketers alongside photo/video/text ads and social media communication.

What are the prerequisites for this?

There are several:

• Snapchat was the first in this market and remains so. This company has done a lot of work to familiarize users and businesses with AR communication.

• Instagram launched a similar campaign four years ago. In this time, a whole generation of AR experience creators for the platform has emerged, and for users, it has become a very understandable experience.

• In this time, development studios and marketing agencies have learned the main mechanics and how to properly integrate AR experiences into their advertising campaigns and show attention-worthy results that truly engage users.

• A giant like TikTok is also launching its own program for branding AR effects, which only shows that they are also interested in developing the platform as a tool for promoting brands through AR.

What conclusions can be drawn?

For users: There will soon be much more interactivity on social media, and competition for user time will reach a new level.

For brands: Many big players have already paved the way and are successfully reaping the benefits of such integrations. All brands that use social platforms as a tool for working with their audience should start implementing various AR experiences in their campaigns as early as possible and find the one that best suits their audience.

For marketing agencies: It is important to catch up with this trend and offer high-quality AR integrations to your clients. It is extremely important to work on AR effect integration strategies; otherwise, it can turn into an expensive toy for the client. This will increase your expertise, authority in the market, and give you a competitive advantage.

For studios and developers: It is essential to have a clear understanding of what you are selling to the end consumer - this is reach, views, and quality of experience retention. Also, having highly polished workflows within the team significantly facilitates communication and results for client brands and agencies.