Pros and cons of buying web advertising media via CPA, CPC and CPM
As a niche publisher, there are likely two ways you think about web advertising. For some of you, advertising is a primary way you generate revenue, by selling ad space in your own magazines, portals and email newsletters. For others, buying web advertising in other people’s media is part of your audience development strategy. And for many of you, you think of web advertising for both reasons – to generate revenue for your business and to buy ads in media channels that you don’t own to drive traffic to your publishing properties.
A few weeks ago we wrote about how publishers can generate profits by selling sponsorships across platforms. Today, let’s look at the three main ways, as a buyer of media, you can generate audience and drive traffic to your website using other people’s media properties.
Three fundamental ways to drive traffic to your website using web advertising
Cost per action is our favorite among the three because if we know what our subscribers and customers are worth, then we can buy media to generate new subscribers and customers all day and all night. CPA requires a minimal amount of effort to manage because payment for these actions are submitted only as a result of a visitor taking some pre-defined action on your ad. This is an ideal method of payment for advertisers who want to guarantee that they only have to pay for the number of customers generated as a result of their advertisement.
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Cost per click is our second favorite, because as publishers we have control over our landing pages and have an idea of conversion rates we can expect, so we can make CPC programs work for us. CPC is where you pay for each click made on your advertisement. This helps guarantee that you only pay for those viewers of your ad who actually click on it and visit your site, and then converting that visitor is up to you to maximize through landing page testing and creative.
Cost per thousand is where you pay for every 1000 impressions of your advertisement. CPM is at the bottom of our list because it’s where we have to interpolate clicks and conversions from those impressions that we’re buying and we find that we’re often wildly off the mark. As niche publishers it’s much less risky and much more rewarding to pay on a per action basis with the CPA model or on a per click basis with CPC model because at least we can monitor arrivals from those efforts and calculate and measure conversions accordingly.
You’ll note that we like CPA the best because it represents the lowest risk and the highest reward when buying traffic to your site. When you know what your customers are worth to you in annual or lifetime spending, you are able to effectively buy new customers based on what you know they are worth. On the reverse, when you’re buying impressions via a CPM model, measuring the effectiveness of those campaigns becomes much more volatile.
There are of course ways to ultimately calculate Cost per Action using the CPC and CPM models, which we will address in a future post.