There are three main advertising payment models: pay-per-impression (CPM), pay per click (CPC), and pay per action or lead (CPA and CPL). Advertisers, marketers, and resource owners often cannot choose the model that is best for a particular campaign. To do this consciously, experts need to understand when and how best to use this or that model, as well as their disadvantages and advantages.
You may be surprised, but each of the three main types of advertising payment has its pros and cons and remains relevant. Therefore, some marketers choose the easiest and safest way to solve a problem. They distribute risks using all three models in each advertising campaign. However, this approach is good if you want to avoid failure by all means. And if you want to maximize the effectiveness of investment in advertising, you need to pay attention to the features of the approach to pay for ads.
Please note that each model under discussion carries certain risks for both the advertiser and the owner of the advertising platform. Knowing the advantages and disadvantages of pay per click, leads and impressions, marketers are able to optimally distribute these risks between the brand and the owner of the resource. This is a win-win situation in which the resource owner benefits from increased advertising efficiency, while the advertiser is interested in increasing the advertising revenues.
This article will introduce you to the features of CPM, CPC and CPA advertising payment models. The information provided will help you choose the best approach for each specific advertising campaign.
Pay for impressions
In the CPM model, the advertiser pays whenever the advertisement is displayed on the site page. This mapping is considered to be a display, and it doesn’t matter whether the user actually noticed the ad and whether it reacted to the advertisement. Brands usually pay for blocks of a thousand hits.
Pay-per-impression campaigns bring advertising revenue to owners that are easily measured and predicted. But advertisers have to take the effectiveness of a CPM campaign on faith. They can indirectly evaluate it by the growth of traffic from the advertising platform, but this metric is not enough for a comprehensive assessment.
Despite this, pay-per-click advertising remains very popular. The CPM model does not always guarantee the growth of traffic for advertisers, but it does guarantee an increase in brand awareness. Of course, for this, marketers should choose popular themed sites, advertising on which is expensive.
To control the effectiveness of pay-per-click advertising, marketers often combine this model with pay-per-click. In such cases, they acquire blocks of views at a discount and pay extra for each user’s transition to the brand’s website. This approach allows distributing risks between the advertiser and the resource owner, as well as ensures the mutual interest of the parties in the effectiveness of advertising campaigns.
The CPM model works most effectively in advertising campaigns using banners published on popular industry sites. This type of ad easily attracts the attention of the audience and increases your brand awareness, even if users don’t go to the site.
Pay per click
In the CPC model, the advertiser pays for each click of the user on the ad. Pay-per-click advertising has gained popularity due to transparency for both the advertiser and the owner of the advertising platform. In addition, the CPC model automatically distributes risks between the brand and the resource, since both parties are financially interested in the effectiveness of advertising campaigns. Finally, the popularity of pay-per-click advertising remains high thanks to the work of convenient contextual advertising systems, for example, Yandex.Direct and Google AdSense.
Pay-per-click advertising is especially popular among advertisers who need targeted traffic. Using contextual advertising systems, brands can attract to the site an audience already interested in a particular product.
As noted above, when choosing a pay-per-click model, marketers distribute risks between the advertiser and the information platform. Brands can be sure that the owner of the resource “hangs” the ad unit at the most prominent place of the site. The owner of the advertising platform may have no doubt that the advertiser will provide the visual appeal of the banner or the clickability of the text ad. Another advantage of the CPC model for the resource owner is that there is no need to search for advertisers. It is enough to insert the code of an ad unit of one of the popular contextual advertising systems on the pages of your website so that ads of different brands are displayed on the resource 24 hours a day and bring income to the owner.
The disadvantages of CPC campaigns for advertisers include high competition in popular contextual advertising systems, which increases the cost of a click. In addition, traffic to the site does not guarantee conversion. Advertising site owners who publish CPC advertising depend on its effectiveness, since they receive payment only for users going to the advertiser's site.
Brands can bid on pay-per-click advertising if it is important for them to fully control spending. As noted above, the CPC model is suitable for attracting traffic.
In the CPA model, the advertiser pays a click on the advertisement and the conversion action of the user. Brands define such actions on their own. These may include placing orders, subscribing to a newsletter, moving to a specific page of the site, etc.
It is difficult to imagine that the CPA model would interest any owner of a popular advertising platform that does not provide marketing services. Site owners are afraid of the difficulties associated with monitoring leads. In addition, lead generation requires some effort. Providing the conversion advertiser to the advertiser, the resource owner would be engaged in a matter that was unusual for himself. This does not apply to partner resources that are created specifically for participation in CPA networks.
Most advertisers find the ad-paid pay-per-advertising model as attractive as it allows you to pay for real conversions. The main advantages of this model are zero risk of inefficient spending of the marketing budget. Its disadvantages include the high cost of the lead. In addition, CPA-campaigns provide conversion to the advertiser, but practically do not work for the brand.
The lead pay model fits well-known brands selling relatively simple products. CPA advertising is also usually beneficial for online stores selling branded products.
What is the most profitable advertising model for you?
Each of the considered advertising models deserves a place in the arsenal of brands and marketers. When choosing the best approach for a particular campaign, the marketer must determine which one will be the most effective. In this case, the specialist should take into account the goals and objectives of the advertising campaign.
For example, the CPM model is good to use for branding. If you need traffic, choose a CPC model or combine pay-per-click-to-impress impressions. And if you are only interested in conversions and you are ready to pay for them, stop at the CPA model.
Choosing a CPA-model, the brand has virtually no risk of wasting money. However, in most cases, this approach forces the advertiser to delegate some of the marketing authority to a contractor who can generate leads. This is usually associated with relatively high costs and the need to transfer important business information to marketers. Only companies with market prestige and absolutely confident in their product can afford such a move.