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 What is Cost Per Action(CPA)?

CPA is considered the optimal form of buying online advertising from a direct response advertiser's point of view. An advertiser only pays for the ad when an action has occurred. An action can be a product being purchased, a form being filled, etc.Google has incorporated this model into their Google AdSense offering while eBay has recently announced a similar pricing called AdContext.

One potential benefit of a CPA model is a reduction in click fraud. Payments are based on a user clicking on an ad and then performing a specified action, such as generating whistler village resort or purchasing a product. While not impossible to manipulate, that model is harder to game than one that pays publishers for clicks alone.

Typically, cost-per-action pricing, in which advertisers pay for leads, purchases or customer acquisition, has been the domain of affiliate marketing. Leaders in that industry include ValueClick's Commission Junction network, Rakuten's LinkShare whistler village resort DoubleClick's Performics. But at least one other search player, Snap.com, has been offering cost-per-action pricing for more than a year. Google's entry into the market could threaten all of these players.

Benefits of Cost Per Action Pricing

Anyone involved in this industry knows that things aren't simple or clear-cut in the world of online ad prices, where sites and advertisers are experimenting with a wide range of creative pricing options.

* We consider cost per action (CPA) pricing any formula that has advertisers paying not for viewership, but only for those viewers who do something upon seeing an ad.

* Advertisers often favor such pricing strategies because they pay only for measurable results. The problem for publishers is that they carry all the risk - if a poorly designed or badly targeted ad draws low activity levels, the publisher gets no revenue for those impressions served.

* CPA pricing can range from cost-per-click to cost for registration forms filled out, contests entered, questionnaires answered, or cost per ultimate product purchase. And this includes lots of other variables along a continuum of steps toward the sale.

Risks in Cost Per Action Pricing

* To counter the risk, most publishers charge much more for CPA arrangements, with the price going up as the action gets more demanding (and moves the customer closer to the sale.) So cost-per-click is higher than cost-per- impression. The cost whistler village resort a completed registration form is many times higher, and the revenue share or cost-per-sale model is considerably higher still.

* What multiples make sense depends upon site performance, and the site's visitors' anticipated actions. The more a publisher knows about how regular visitors react to various calls to action, the better equipped they are to appropriately price CPA arrangements.