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April 4, 2023
From Cost to Benefit: Evaluating the ROI of AR Integrations
AREYES analysis behind ROI of AR integration process and reasons why AR works 10x times better than traditional media advertising
Article Navigation:
- What Metrics Do Platforms Provide Us With?
- How To Measure AR Integration In Budget?
- Why Does Social-AR Work?
- The Future Of Social-AR
- Summary
One of the most common methods of measuring the value of advertising is by using various metrics such as CPM, CPV, and many others. This article will discuss these metrics and explain how approaches from traditional advertising can be used in calulating the value of AR integrated into marketing campaigns in dollar terms.
Firstly, in the Social-AR industry, the same laws apply as in traditional 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’ve noticed that no one is highlighting the effectiveness of AR advertising across the internet, so we at AREYES wanted to offer our framework for evaluating the value campaign that includes AR experience.
Challenge
Many metrics are 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 per 1000 impressions.
- CPV (cost per view) – the cost of per view.
- CPC (cost per click) – the cost of per click.
- CPL (cost per lead) – the cost of for each lead received.
- CTR (click-through rate) – the percentage of clicks relative to the number of impressions.
- CPA (cost per action) – the cost for each completed action.
- SER (social engagement rate) – the total number of interactions with content, such as likes, comments, and reposts, relative to the number of views or completions of the content.
- UGC (User Generated Content) metric – a metric used to measure the effectiveness of user-generated content.
- The boss metric ROI (return on investment) – the ratio of profit to advertising costs.
These metrics help advertisers and marketers evaluate their advertising effectiveness and determine what changes are necessary to improve their strategy.
What metrics do platforms provide us with?
- Impressions – the total number of times the effect was shown
- Opens – the total number of times the effect was opened (i.e., initial interaction)
- Captures – the number of times the shutter button was pressed (recording of interaction)
- Saves – the number of times the interaction was saved
- Shares – the number of reposts
- Uses – the number of times the effect was used in video calling
- Average time open – the average time the effect was used (depth of interaction)
How to measure AR integration in budget?
To calculate the value of AR integrations in dollar terms, we need to understand how to calculate these parameters.
Since AR integration is a unique phenomenon that includes both views and interaction with the user, we will evaluate these indicators separately and then sum up the effect.
To calculate the dollar equivalent, we are interested in:
- Impressions – Helps to calculate CPM
- Shares – or in our case UGC, i.e., the number of shares of their own unique posts with branded AR effect.
The remaining metrics help analyze the depth and quality of interaction and, thus, require close attention. However, their detailed analysis should be done in a separate article.
The average CPM for Instagram Stories in 2022-2023, according to adsuremarket.com is $5 per 1000 views or $6.7 per 1000 views, according to k6agency.com.
The average UGC for Instagram in 2022-2023, according to brandsmeetcreators.com is $150-$512, depending on the number of followers of the person reposting (1k – +100k).
The median is $150.
Let’s try to estimate the value based on the most modest parameters for one of the AR effects, which, in our subjective opinion, has quite average indicators:
Budget: $35,000
Number of followers on the account: 10k+
CPM = 507.6 * 6.7 = $3400
UGC = $150 x 3500 = $525,000
Total = $528,400
The ROI of such advertising integration exceeds 15000%.
And this is a rather conservative estimate. The effectiveness of well-organized AR creatives can reach 10000%-30000% relative to the investment.
This is achieved by using a well-thought-out strategy for integrating AR effects, involving influencers in spreading the effect and turn on additional AR advertising support. Reach can grow by 3x or even 10x, while additional costs will be no more than 25-30% of the effect development budget.
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 in 2022 according to public data.
The average time a user spends on a story is 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.
Moreover, Zac Fields, SVP, graphic technology and integration, Fox Sports said that augmented reality will also be a big part of the Super Bowl LVII pregame.
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! At AREYES we want to draw the attention of brands, agencies and developers to this thesis, as it forms the value of efficient AR integration.
The future of Social-AR
Currently, the integration with advanced AR experience in Social Media 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 quite soon:
- A Slightly few studios that able to provide commercial-grade AR services
- The AR is moving to mainstream capturing the minds of millions users
- Lack of media coverage of real value of AR as marketing tools
What should change:
- The potential consumer market for AR integrations will emerge from the shadows – thousands of brands that communicate with their audience through social media like Instagram, TikTok, Snapchat will implement this as one of the main tools for engaging with their audience.
- Quality of AR experience: the number of studios and individual creators 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 to 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 pretty simple:
- First, new technology is invented – this is the trigger.
- Many players start experimenting in a new dimension, investors pump money into the space, and the trend inflates.
- After testing many hypotheses that do not work, interest from most “gold diggers” wanes, and people abandon the niche en masse.
- The remaining players who have been driving trends all along keep going and gradually find real applications for the technology that brings in money or saves costs in existing businesses.
- Gradually, the niche stabilizes, fully integrated into the existing economy, and the business becomes precise and predictable.
The social-AR slowly but surely moving to the fifth, final stage threshold. What does this mean? Meaning 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 remained so. This company has done much work to familiarize users and businesses with AR communication.
- Instagram launched a similar campaign four years ago. During this time, a whole generation of AR experience creators for the platform has emerged, and for users, it has become a very understandable experience.
- Around 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 genuinely engage users.
- A giant like TikTok is also launching its own program for branding AR effects, which shows that they are also interested in developing the platform to promote brands through AR.
What conclusions can be drawn?
- For users: There will soon be 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 to work 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 essential to catch up with this trend and offer high-quality AR integrations to your clients. It is imperative to work on AR effect integration strategies; otherwise, its purpose is uneconomical. The positive impacts of Ar Integration will increase your expertise and 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.
