Google AdWords, how does "target CPI" affect performance? (Android app)

Question

I'm advertising an app using AdWords. It's been around a month now and everything is fine, there's just one thing I don't understand and it's the "Target CPI" (cost-per-install? Although in parenthesis it says cost-per-click).

The thing is, you can change it to any set value you want. Google did the best they can to be extremely vague at explaining this in their terminology, so I called them up. Their IT guys were no help whatsoever as they kept giving me vague answers ("oh this should be between x and y") when I asked them what does it actually represent. Eventually, they said they don't know and they'll have to talk to their experts.

Currently I have it set at $0.075. At a daily budget of $6.5, I get 1000 clicks, which I think is very good (compared to my other attempts at $1 CPI and $25 daily budget where I got 1400~ clicks). But it's all relative, so I don't know HOW effective this is. My conversion rate is always 50% or more no matter what.

My question is, what effect will a lower CPI have? what if I set it to $0.0075? It's silly to think that I will get 10000 clicks, but even at Google they told me they don't know.

Note that AdWords recommends me to set it between $0.375 to $5.

Answer 1

Setting a lower CPI means you are willing to pay less per install. When using a CPI bid you are allowing Google to automatically adjust your actual cost per click bid in a way they feel will drive you the most installs at your acceptable cost per install.

Google has a tool called bid simulators which allow you to estimate the impact of changing your bids. There is a section for Target CPA bid simulators that is the equivalent of a CPI bidding strategy for app install campaigns. If you have enough data in your account you may be able to use this tool to estimate the impact of changing your bids though in your case since your CPI bids are extremely low I don't believe the estimates will be accurate.

Instead of monitoring clicks and CPI the key performance indicator you should monitor is your actual cost per install vs your revenue per install (depending on how you monetize your rev/install number may vary) For example you have an install conversion rate of 50% but unless you are selling a paid app (rather than in-app purchase or ads) then your rev/install will vary. In that case using CPI bidding may not yield the best ROI because Google doesn't care about the quality(revenue) of the install but rather only the quantity of installs at your target CPI.