The online advertising model is a step in the marketing strategy implementation. There are a few types of advertising online, like social media ads, video ads, email ads, website ads, etc. But, the advertising models define the way advertisers pay for the ad to the publisher.
You’ve probably seen abbreviations like CPC, CPA, CPM, CPL, PPC, etc., but do you know their meaning?
These advertising models describe how you can reach out to the audience and how to pay the advertiser for the service.
Let’s explain this, so everyone can understand the abbreviations and their purpose in the digital advertising era.
1. PPC – Pay-Per-Click
PPC is when the advertiser pays for every “click” on the ad. PPC is also known as CPC (cost-per-click). It’s mainly used when the ad is placed on search engines and social networks, for example, Google Ads or Facebook Ads.
That means the advertiser must focus on specific keywords so the search engine can crawl the needed information and determine the ranking factors. PPC is beneficial for advertisers and ad platforms because it provides exposure to those looking for relevant content.
If it seems like a lot of jobs to you, try hiring a pay per click advertising agency to help you figure out the best PPC models for your business. You have the option to choose:
– Flat-rate model, when the advertiser pays a fixed price for a click
– Bid-based model, when the advertiser bids the maximum amount they can pay for an ad position
So, advertisers don’t pay for the listing but only for the effective clicks on the ad.
But, how much does a click cost? It’s simple to calculate if you divide the ad costs by the number of ads clicked.
2. CPM – Cost per Mille
CPM is the most popular web advertising model when the advertiser pays for every 1,000 impressions. The publisher defines the price based on the average daily pageviews. You can launch the ad on as many websites as the budget allows you.
After the campaign is completed, every publisher sends an analytics report, so you can see if their measures are compatible with your efficiency estimations.
Advertisers usually look for higher-ranking websites with a few thousand impressions daily (or even more).
The publisher offers their price list, so the advertiser can choose how many impressions they want to buy. In this case, it doesn’t matter how many clicks are accomplished because the package goes for the impressions only.
3. CPA – Cost per Action
This method is named Cost per Action since Cost per Conversion’s CPC can be easily mixed with Cost per Click. In this case, an action is every click, subscription, registering on the website, commenting, or even leaving a contact for further promotion.
The advertiser pays for the wanted action. For example, if the goal is to get subscribers, they pay only for the accomplished subscriptions but not for comments, clicks, shares, etc. Also, there can be more than one desired action.
The publishers highly dislike this model because they charge by action, but no one guarantees that someone will take the desired action.
4. CPL – Cost per Lead
It’s similar to CPA regarding user actions, but it’s quite different when types of action are compared. Leads cover every action the user can take, like signing up, subscribing to a newsletter, contacting the service provider, asking for a quotation, placing an order, and so on.
So, advertisers have a bigger expense compared to CPA because there are many potential beneficial outcomes.
5. CTR – Click-through Rate
CTR is the ratio between actual clicks on an ad and the total number of impressions to measure the campaign’s success. For example, if the banner delivered 3,000 impressions, and 120 people clicked on it, then CTR is 120/3000, which is 1/25 when reduced to the lowest terms, or the CTR value is 0.04, or if we multiply by 100, we get a CRT=4%.
Today’s CTRs are usually lower than 1% because people don’t click on the banners. That’s why CPM is a more effective way to measure campaign success.
Honorable Mentions
Many advertising models are rarely used because they are precise, like PPS (Pay-per-Sale) or PPI (Pay-per-Install). Usually, they are part of the CPA model when more than one action is preferred. Another model that was used in the past is Pay-per-Call (PPC), but it’s pretty limited. People today don’t want phone marketing, even though some agencies are trying so hard to keep it alive.
Final Thoughts
Online advertising models give enough freedom and flexibility to plan the marketing budget effectively. Find the suitable model that fits your business and determine the delivery preferences.
If you can’t do it alone, marketing agencies can help you calculate the costs and maximize the overall effect of the campaign.
