Online advertising models come into existence in 3 forms, namely cost per click (CPC), cost per thousand impressions (CPM) and cost per acquisition (CPA). However, it is obvious that CPC and CPM are the prevailing ones among three. Needless to say that both advertisers and publishers should have knowledge of all of them and take all three into consideration depending on the situation. That’s why let’s analyze each ad model individually!
1) Cost Per Click (CPC) Advertising
The CPC ad model shares the risk between publishers and advertisers. On one hand, a campaign with low clicks is bad for the publisher while a high click campaign is good because the publisher maximizes earnings. On the other hand, a campaign with low clicks minimizes costs from the advertiser’s standpoint while a high click campaign with low return is bad because of high costs.
2) Cost Per Thousand Impressions (CPM) Advertising
Cost per thousand impression campaigns generate certain revenue for the publisher. However, CPM yields uncertain results for the advertiser. Still, it does not necessarily mean that advertisers will get a bad result. CPM is mostly used with brand-oriented banner ads and if put correctly with strong graphics and call to action, advertisers also may benefit from CPM advertising.
3) Cost Per Acquisition (CPA) Advertising
The track record for CPA has shown that CPA only works for a small number of publishers who have been successful in affiliate marketing with highly targeted products or services. It is not true to say that CPA advertising does not work at all, but generally the results are not satisfactory. In addition, CPA is only risky for the publisher and it does not place any risk on advertiser.
To sum up, CPM works best for the publisher because it offers guaranteed revenue. CPC works better than CPM for advertisers because it enables them to pay only for clicks. Lastly, CPA works perfectly only for advertisers because they pay for concrete results such as leads or transactions.