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Online advertising includes cost per click (CPC), cost per impression (CPM), cost per action (CPA), and cost per lead (CPL) campaigns. Advertisers can use different tactics to attract consumers, but must choose one campaign type. CPC involves paying for clicks on an ad, while CPM assumes higher traffic leads to more sales. CPA only charges if a viewer completes a required action, and CPL only charges for qualified leads. All four methods allow scalable advertising costs.
Four basic types of online advertising are cost per click (CPC), cost per impression (CPM), cost per action (CPA), and cost per lead (CPL). While advertisers use a variety of tactics to grab the attention of potential consumers, they must purchase ad space by operating on one of four campaign types. Whether presented in a pop-up format, banner ad format, or as floating ads, the ads will entice site visitors to make a purchase via one of these strategies.
The cost-per-click (CPC) model invites users to express interest in a product or service by clicking on an ad for more information. When purchasing a CPC ad, an advertiser can accept pricing using a flat-rate or bid-based purchasing scheme. With a flat rate scheme, the buyer and seller of an online ad agree on a predetermined cost for each click on the ad. With a bid-based plan, prices are sold in a private auction with bids made by competing buyers. One disadvantage of the CPC advertising model is that it can be compromised by click fraud.
Cost-per-impression (CPM) advertising campaigns work on the assumption that a higher volume of traffic for an ad can lead to a higher volume of sales. The cost per impression is usually set at a fraction of a cent. Depending on the value of the traffic, however, a buyer may cap the cost per impression at a higher rate.
CPA (cost per action) ads cost a buyer money only if an ad viewer completes a required action based on the ad. For example, some ads encourage a viewer to complete a registration form, while others specify that viewers must exchange credit card information for a service or product. Advertising online via a CPA campaign allows buyers to test low-cost advertising strategies before committing to a more expensive campaign. Additionally, this type of campaign offers a means for the buyer to develop visibility in the advertising industry.
Cost-per-lead (CPL) ads only cost the buyer if a qualified lead is generated based on the ad. Such ads are often used to promote high-end services, such as investment accounts or real estate purchases. Leads are qualified based on a variety of factors, including age, financial situation, or medical history. Advertisers hoping to initiate customer contact, such as health insurance companies, often use CPL ads.
One major benefit of each of these four types of advertising methods is that they allow advertisers to reach online audiences at a scalable cost.
