CPA or cost per action and CPL or Cost Per Lead are notions that are linked to the online advertising industry. The former is also often referred to as cost per acquisition even though it is less accurate.
In this article we refer to CPA or cost per action, as is used by online advertising agencies that are in the business of organizing advertising campaigns for their customers. Examples of well known online CPA offer agencies are Azoogleads, Neverblue or Copeac and at the time of writing, it is estimated there are over 1900 such companies online.
In short, CPA and CPL are linked to client acquisition activity for businesses on the Internet. The industry is relatively young, Google started only in 2006, but has since then discontinued the beta program in favor of DoubleClick, which will be the subject of a future article on our blog.
The biggest advantage of CPA and CPL was seen in its ability to combat click fraud. Usually, this involved clever people who would find ways to automate the process of clicking on ads to generate revenue – at a cost to the advertiser – which was a dishonest way to earn money, as the advertiser received nothing in return.
Basically, when an individual or company promotes CPA offers they get paid for generating a specific action such as a lead or a sale. Advertisers will only pay when this specific action has been taken by the visitor to their website. One could say it is a variant of a no cure-no pay arrangement.
These actions can come in different forms, for example, someone will be asked to give his email address, or his postal code. Other actions can involve joining a website, such as a dating website, or answering questions in a survey. In both cases, the advertiser paid for a lead.
The upside for the advertiser is that he is being guaranteed a specific result, while the downside for the promoter is that he is now bearing the full brunt of the risk involved in the uncertainty of advertising results.
The operating principle is simple: find an offer and put it in front of the right people. A good example would be advertising an offer to win a a year’s worth of diapers on a website visited mostly by young parents.
The advantage of stepping into a new industry is that you can make your mark. You can specialize in certain segments of the market and corner a piece of the action while it is still early.
The people who have managed to become successful in this field will often say that it is a numbers game. Analise the market, test and then leverage. What this all means will be the subject of our future posts.
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