Online advertising models show up on Web sites in several forms — cost per click (CPC), cost per thousand (CPM) and cost per acquisition (CPA). Publishers and advertisers should know and use all three depending on the situation.
Cost Per Click (CPC)
ost per click is popular with publishers who use services such as Google AdSense, AdBrite, etc. It is especially popular with advertisers because of the ability to track return on investment.
The CPC advertising model splits the risk between the publisher and the advertiser. A campaign with low clicks is bad for the publisher because it receives less revenue, while the advertiser minimizes costs.
A high click campaign with poor conversion is great for the publisher, who maximizes revenue, but bad for the advertiser because of high costs and low returns.
The goal, of course, is to split risk and reward as evenly as possible between the two parties.
Contextual ads such as Google AdSense can produce the equivalent of $2-10 CPMs per ad unit based on the clickthrough rate — especially if the content is properly optimized.
The advertiser places ads on Web sites via Google AdWords, which allows them to track the clickthrough rates, cost per click and conversion rate.
Cost per click advertising in a direct sales environment often is less successful because of the high labor costs in setting up and managing the campaign.
So CPC deals are worth considering for publishers, but they should be used only for certain types of list-like advertising likely to encourage clicks.
Cost Per Thousand (CPM)
ost per thousand impression campaigns produce certain revenue for the publisher and uncertain results for the advertiser.
But it dominates the Internet landscape, and with Internet CPMs far lower than other forms of advertising, it can be argued that an advertiser doesn’t necessarily get a bad deal.
However, because of the risk to the advertiser, the CPM should be lower than the typical cost of a CPC campaign (converted to a CPM value).
One other creative approach for the reluctant prospect is a hybrid of CPM and CPC. The advertiser pays a base CPM at a discount to the rate card, plus a CPC. That splits the risk more evenly between the publisher and the advertiser.
CPM works best for visual, branding-oriented campaigns while CPC is worthwhile for textual, response-oriented campaigns. Making the right choice could determine the difference in managing expectations for the client and getting them to sign a renewal to the contract.
Cost Per Acquisition (CPA)
t’s hard to imagine why any advertiser is still pushing CPA or why any site is willing to consider it. The track record for CPA has been terrible. There are examples of where it has succeeded, but those examples are rare.
Affiliate Marketing
CPA works for a very small number of publishers who have succeeded in affiliate marketing.
These publishers have found a niche with little competition and usually sell a highly targeted product or service.
So yes, CPA can work in certain circumstances. But the odds of success using affiliate marketing are extremely low.
The problem lies with the fact that Internet advertising, like all advertising, is a combination of branding and response. CPA assumes that branding has no value.
Further, it places all of the risk and responsibility for the sale on the publisher, while putting none on the advertiser, which is especially tricky if their site is poorly produced.
Advertisers of course love CPAs because they have all reward and zero risk. That’s why they flock to affiliate marketers such as Commission Junction.
The high risk on the part of the publisher is why an exceptionally high percentage of affiliate marketing sites fail to survive.
All three online advertising models have a place in any publisher or advertiser strategy. But they should be chosen with their respective strengths and weaknesses well in mind.
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Promise Media provides online marketing strategies for content-rich Web sites. It also publishes a guide to best Caribbean vacations to test online tactics.
October 30th, 2011 at 1:25 am
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