Cost Per Acquisition (CPA)
Nationwide Marketing provides cost effective cost per acquisition systems and search marketing in an effort to improve advertising results and better manage web traffic and communication. While most comparison-shopping engines revenue is based on cost per click, there's definitely a new trend toward cost per acquisition models, according to Scot Wingo, CEO of ChannelAdvisor Corp., a provider of e-commerce technology and marketing services for selling on the web.
Cost per acquisition (CPA) is another word for cost per action and is used interchangeably with this term because cost per action is about acquiring something (typically new customers by making sales). CPA is also known as pay per action (PPA). CPA measures the advertiser's per conversion cost from start to finish, from the inclusion to the search engine results to creating interesting landing pages that grab the attention of the visitor. This means cost per acquisition measures how much it costs in advertising to convert one person from a visitor to a client for the company.
What's so great about CPA?
This is popular with many advertisers because they only pay for when the desired goal is reached. The specified outcome of a conversion is generally a purchase from the advertiser, or a form being filled out by a visitor so that the visitor's name and email address can be added to a list of potential clients. In short, once the conversion occurs, the advertiser pays the publisher an agreed upon fee from the advertiser for every lead (Cost-Per-Lead) or for every sale (Cost-Per-Sale).
CPA is different from cost per click (CPC). CPC's goal is to drive a high volume of traffic to the advertiser, whereas CPA provides action/acquisition opportunities by offering financial incentives (typically in the form of a revenue share percentage) to web publishers.
There's interest among retailers in the pay per acquisition model because it's a less risky proposition in that they pay only when they've made a sale, Wingo says.
Who's using CPA?
Several niche players including Snap, ValueClick and Jellyfish have already adopted CPA. eBay has launched CPA in its AdContext program. In late 2006, Shopping.com debuted a new shopping cart that would allow it to implement a cost-per-acquisition type of model. And, Google has recently acknowledged that it is testing this emerging model because of the click fraud problems associated with CPC. If Google adopts this model, it could explode CPA's popularity and help it gain acceptance among e-retailers and web publishers.
Who benefits from CPA?
Direct response advertisers consider CPA the optimal way to buy online advertising, as an advertiser only pays for the ad when the desired action has occurred. And, the entire burden of responsibility falls on the publisher, reducing the advertiser's risk. CPA is best for medium to large businesses. Small businesses can't afford to pay the relatively high CPA premiums to publishers. Publishers who can afford the risks associated with CPA can benefit from it because they are paid such high premiums. But, they have to remember that with this model they are not only responsible for influencing the customer, but also closing the deal, too.
Effective Cost Per Action (eCPA)
A related term, eCPA or effective Cost Per Action, is used to measure the effectiveness of advertising inventory purchased (by the advertiser) via CPC, Cost per mille (CPM), where M is the roman numeral of 1000, or Cost Per Thousand (CPT) basis. In other words, the eCPA tells the advertiser what they would have paid if they purchased the advertising inventory on a CPA basis instead of any of these other advertising models.