Cost Per Mille (CPM)
- Definition: The price per 1000 banner impressions in dollar currency.
- Measurement: The number of impressions solely determines the payment.
Advantages
- Advertisers know exactly how many times their banner will be shown and the daily/total costs.
- Common model when buying media against a specific site/ad spot/URL.
- Prioritized by ad-networks as publishers know the expected credit per impression.
Disadvantages
- Weak correlation with sales or leads.
- No indicators for the advertiser on campaign, media, or banner quality.
- Advertisers might receive cheap media instead of effective media when dealing with multiple sites or ad spots.
Pay Per Click (PPC)
- Definition: Hosts receive revenue from advertisers only when ads are clicked.
Types of PPC
Flat Rate PPC
- The publisher and advertiser agree upon a fixed amount paid for each click.
Bid Based PPC
- Advertisers inform hosts about the maximum amount they are willing to pay for a given ad spot, often based on keywords.
Note: Precautions must be taken to avoid CLICK FRAUD.
Cost Per Click (CPC)
- Definition: Similar to PPC, advertisers pay when a click is made on a banner impression.
Advantages
- Advertisers know daily/total costs as they know the number of clicks expected.
- Banners will be shown until enough clicks are generated.
- Common model for exposure with no direct lead or sale goals.
- Quick optimization by ad-networks for high CTR.
- Good indicator of banner quality.
Disadvantages
- Weak correlation with leads or sales.
- Dependent on click tracking technology.
- Exposed to click frauds.
- No indicator for campaign quality, only banner quality.
- Cheap media might be received instead of effective media.
Cost per Acquisition (CPA) / Cost per Sale (CPS) / Cost per Lead (CPL)
- Definition: Payment is made explicitly per transaction type by the end user.
- Depends on the cost of sale, cost of lead, or a percentage of the sale's credit.
Advantages
- Payment is made based on results only.
- Advertisers prefer this model due to zero risk.
- Low possibility of frauds.
- Banners can be shown for an unlimited time period.
Disadvantages
- Premium media will not be allocated by the publisher.
- Not a favorable model for publishers.
- Dependent on conversion tracking technology.
Dynamic Cost per Mille (dCPM)
- Definition: The most appropriate model for both advertisers and publishers.
- Advertisers continue to advertise as long as their eCPA is under their CPA goal.
- Publishers continue as long as the CPM received is higher than competing advertisers.
Advantages
- Payment by advertisers is based on results only.
- Advertisers pay a minimal price in advance.
- Balances publisher’s profit and advertiser’s risk well.
- Low possibility of frauds.
Disadvantages
- An advance amount from the advertiser is at stake.
- Dependent on conversion tracking technology.