January 7, 2009

Online advertising cost structures

  • CPM (Cost Per Impression) is where advertisers pay for exposure of their message to a specific audience. CPM costs are priced per thousand impressions. The M in the acronym is the Roman numeral for one thousand.
  • CPV (Cost Per Visitor) or (Cost per View in the case of Pop Ups and Unders) is where advertisers pay for the delivery of a Targeted Visitor to the advertisers website.
  • CPC (Cost Per Click) is also known as Pay per click (PPC). Advertisers pay each time a user clicks on their listing and is redirected to their website. They do not actually pay for the listing, but only when the listing is clicked on. This system allows advertising specialists to refine searches and gain information about their market. Under the Pay per click pricing system, advertisers pay for the right to be listed under a series of target rich words that direct relevant traffic to their website, and pay only when someone clicks on their listing which links directly to their website. CPC differs from CPV in that each click is paid for regardless of whether the user makes it to the target site.
  • CPA (Cost Per Action) or (Cost Per Acquisition) advertising is performance based and is common in the affiliate marketing sector of the business. In this payment scheme, the publisher takes all the risk of running the ad, and the advertiser pays only for the amount of users who complete a transaction, such as a purchase or sign-up. This is the best type of rate to pay for banner advertisements and the worst type of rate to charge.
  • CPL (Cost Per Lead) advertising is identical to CPA advertising and is based on the user completing a form, registering for a newsletter or some other action that the merchant feels will lead to a sale. 
  • CPO (Cost Per Order) advertising is based on each time an order is transacted.
  • Cost per conversion Describes the cost of acquiring a customer, typically calculated by dividing the total cost of an ad campaign by the number of conversions. The definition of "Conversion" varies depending on the situation: it is sometimes considered to be a lead, a sale, or a purchase.
  • CPE (Cost Per Engagement) is a form of Cost Per Action pricing first introduced in March 2008. Differing from cost-per-impression or cost-per-click models, a CPE model means advertising impressions are free and advertisers pay only when a user engages with their specific ad unit. Engagement is defined as a user interacting with an ad in any number of ways.
  • One time payment ads: There are a few other methods of advertising online that only require a one time payment. The Million Dollar Homepage is a very successful example of this. Visitors were able to pay $1 per pixel of advertising space and their advert would remain on the homepage for as long as the website exists with no extra costs.

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