A (very) simple guide to Cost Per internet advertising models.
Posted by Lauren Potgieter on 09 Oct 2009 | Tagged as: Common SEO Topics
CPA, CPC, CPM, CPL – until recently, these acronyms presented themselves to me like some mysterious code that needed to be cracked. (I will not even mention my lack of knowledge when it comes to coding itself). In my state of confusion and my ignorance in thinking that all these terms were pretty much the same thing, I decided to look them up and find out exactly how these terms can benefit us mere mortals who would be pleased with some extra traffic. As juvenile as it might seem for some, I am going to start at the beginning, so that some of us (me) can benefit from (understand) these terms and why using them might be an additional way (but definitely not the only way) to generate interest.
One of the main reasons why I love Wikipedia is that it tends to explain terms and definitions to me in such a way that I suddenly experience a light bulb moment, instead of scratching my head and thinking “I wish there was a definition for this definition!” Faithful Wiki explains CPC (Cost Per Click) as being “an Internet advertising model used on websites, in which advertisers pay their host only when their ad is clicked.”Ok, so that is simple enough to understand, even for me. CPC seems to be the piggy in the middle in terms of pricing models. With CPC, advertisers cough up every time someone clicks on the ad. As we know already, not every click will result in a purchase or “action”. So what does this mean for the advertisers? Even though CPC brings risk, it is a simple method of advertising your brand in a way that hopefully lets you reap rewards in the end.
CPA (cost per action), like CPC, is a pricing model “where the advertiser pays for each specified action (a purchase, a form submission, and so on) linked to the advertisement. CPA is also sometimes referred to as Cost Per Acquisition. This is because it is all about acquiring something, namely active customers. CPA seems to be a firm favourite with advertisers, letting them pay only when the action has been performed. I am assuming advertisers opt for this because the ad can be clicked on many times before an action is processed, making sure that they get the most from their money.
CPM represents the cost per mile or thousand (M is the Roman numeral for a thousand, but, I digress). What’s that, you say? Well, it is the cost per page impression (the loading of an individual page on a website). This is where Adsense takes centre stage. Adsense is able to calculate ad revenue based on the CPM of a site, which is rather handy when you are deciding whether or not to advertise on your site.
And, when you thought the acronyms were about to end, along came CPL (Cost Per Lead). This is “the contact information of a person interested in the advertiser’s product or service.” CPL doesn’t appear to be a huge hit for advertisers, with many opting for more performance guaranteed methods.
Industry experts believe that the future implementation of Cost Per Engagement model might become the new CPM and possibly attract advertisers to spend more online. Users engage by the means of interaction, whether it’s watching a video, reading some text or playing a game and advertisers believe that interaction will result in more people making online purchases.
All of these actions are indeed just that – actions. It is all about instant gratification. Consumers spot a product or service that they want whilst browsing on a similar or unrelated site, click on that ad or image and voila! You are only three or four steps (and a credit card transaction) away from your dream vacuum cleaner, bed linen set or robot chicken alarm clock. These internet advertising models can help the hosting site as well as the advertisers, but if they are overdone, your site page can end up looking like a casino slot machine with all the flashing lights and images.
