There’s another pricing model that requires even more steps to be completed in order for the publisher to be compensated. Under a cost per action (CPA) campaign, the advertiser pays only for clicks that subsequently see visitors complete some specific action. This action can be a purchase of a product, download of a document, sign-up for a newsletter / membership, or countless other steps.
This form of advertising is essentially affiliate marketing, an arrangement where the publisher is compensated for each sale (or another non-monetary transaction) they’re able to generate for the advertiser. This is obviously low risk for the advertiser since they pay only for transactions that generate their desired outcome.
Here are a few things to know about CPA campaigns:
- Lowest risk for advertiser; they pay only when their desired outcome occurs
- Publisher loses visibility into revenue earned
Advertisers are willing to pay a lot more for a completed transaction than they are for a single ad impression, so CPA arrangements can allow publishers to make quite a bit of money–up to $100 or even more–from a single ad impression.
Again, the opportunity exists here if you have an audience that is a great fit for a specific advertiser campaign. If you’re trying to convince visitors to your big game hunting blog to sign up for a free sample of lipstick, you’ll probably see a terrible conversion rate. But if you’re presenting that same audience with an opportunity to buy hunting apparel, you might be in business.
Disadvantages:
The biggest disadvantage to this arrangement is the increased volatility in earnings. It’s possible that days could go by without a single conversion, even if you’re serving lots of ads and generating lots of clicks.
Another big downside is that the loss in transparency. Once a visitor leaves the publisher’s site and enters the advertiser’s, it’s impossible to know if they convert or leave immediately. The advertiser will of course track this carefully, but this means that the publisher has to take the word of their partner to report honestly on revenue earned.
Most CPA advertisers are ethical and honest in their reporting to partners. But in some niches there are less than reputable characters, and dishonest reporting can be fairly common.