CPA Model Advertising
by Abe Cherian,

One form of advertising online, CPA (Cost per Action/Acquisition) is gaining more popularity, but it's theory is testing whether it can be benefial to the publisher. To determine what's best for your online venture, start by calculating the numbers.

If you're running CPC, CPA, or CPM your performance should be tracked and logged with all the data needed to run the numbers. For example, calculate pricing for number of impressions to be sold divided by 1000 x CPM. To determine what's expected for number of impressions x percentage of CTR, and for the cost per click divide number of pricing for impressions divided by expected clicks = cost-per-click.

This test should help determine which form of advertising works best and gives the publisher a risk value of their target cost per click. If this is lower than your average cost per click, then you're at risk!

CPA model advertising has moved ahead of CPC, and has become more advanced as a marketing and advertising channel. Internet ad revenues reached a new high of $4 billion for the first quarter of 2007, which continued the trend of record setting quarters. It is now obvious that advertisers are utilizing this opportunity to leverage the Internet as a powerful medium that drives both branding and sales results.

Google is currently moving at light speed with their Adsense/Adwords since it revolutionized web publishing by turning personal websites, blogs and forums into extreme money making ventures. Google finally set a new standard for affordable, targeted and effective advertising.

However, the recent issues of click fraud, click attack, ad tracking discrepancies, etc., are starting to cause cracks in online advertising. It makes one wonder whether or not the CPC advertising model that Google, Yahoo!, MSN and others actually works. Click fraud and other critically contentious issues are a big threat to the CPC model.

With the rising costs of ad placement and business budget decline, advertisers are struggling to link a clear return on investment by investing in various online and offline advertising platforms. In order to look ahead of CPC, stay abreast on what the major engines are considering for their own CPA model.

The CPC model is designed to drive high volumes of traffic to the advertiser, where CPA provides action opportunities by offering financial incentives in the form of a revenue share percentage to publishers. Incentives are solely based on actions such as acquiring qualified database entrants (opt-in email), sign-ups, downloads, inquiries or acquiring paying customers.

Today, CPA is considered to be an alternative form of advertising from the advertiser's point of view, since the entire burden of responsibility is on the publisher. The commissions that publishers receive are dependant on good conversion rates from the ads. 

The one downside is that CPA is said to be virtually risk-free for the advertiser, and it discourages marketing innovation and diligence. If publishers consistently present their users to CPA advertising, it could have a long-term effect on the industry.

Although Google is testing CPA, it still remains king as its network size enables advertisers and publishers to reach a substantial user base. eBay on the other hand launched their own AdContext program, which should increase the popularity of the CPA model, because it will lure publishers by promising them a cut of auction sales made from the ads.

The ad model that still performs the best is CPC, depending whether click fraud can be corrected. However, CPA out performs for advertisers while CPM costs are based on the number of times an ad is displayed to the user, and is common to the offline world because of their cost associated with CPM Television and Radio advertising. CPA alone is not the remedy for advertisers that are wishing for branding or with lead generation in mind. Advertiser will continue switching between CPM, CPC and CPA to attract more to their bottom line - which explains the infancy of the CPA model as we know it.

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