Cost Per Engagement (CPE) is a metric demonstrating the cost incurred for each interaction a user has with an ad.
Cost per Engagement (CPE), as portrayed by its name, is a digital advertising measurement that seeks to quantify the cost associated with each user interaction or engagement with a specific ad or piece of content. In essence, CPE represents an ecosystem where advertisers only pay when users interact or engage with their advertisements in a way that is more profound than a simple impression or click.
CPE is calculated by dividing the total campaign expense by the number of engagements. The formula is: CPE = Total Campaign Expense / Total Engagements.
Suppose an advertiser spends $500 on a campaign, which generates 2000 total engagements. By using the above formula, the CPE would be $500 / 2000 = $0.25.
The CPE model is extremely beneficial for e-commerce businesses because it ensures that they only pay for advertisements that resonate with and actively engage their audience. By focusing on meaningful interactions, CPE allows businesses to optimize their ads and tailor their content more closely to their target audience's interests and behaviour.
CPE is intertwined with other metrics, such as Cost per Impression (CPM), Cost per Acquisition (CPA), and Click-Through Rate (CTR). A lower CPE can lead to a higher CTR, meaning more users are not just viewing but also interacting with the ad, which can then lead to a lower CPA, implying a more cost-efficient customer acquisition.