Definition, advantages and disadvantages of CPA advertising

Definition of CPA Advertising

The CPA (Cost Per Action) pricing method refers to charging based on the actual effect of advertising, that is, based on the number of valid questionnaires or orders responded to, without limiting the amount of advertising delivered.

CPA advertising is the most common form of advertising on the Internet. When a user clicks on a CPC ad on a website, the webmaster of the website will receive corresponding income.

The calculation formula for CPA advertising is: CPA = total cost / number of conversions. For example, within a certain period of time, an advertiser spends $6,000 on online advertising for a certain product. The online ad has been exposed 600,000 times, clicked 60,000 times, and has been converted 1,200 times.

Then the cost per thousand impressions of this online ad is: CPM=6000/600000*1000=10 USD The cost per click of this online ad is: CPC=6000/60000=0.1 USD The cost per action of this online ad is: CPA=6000/1200=5 USD CPM is currently the most widely used and simplest indicator to use.

The cost for advertisers to place online advertisements is a clear number, and the number of ad impressions is provided directly by the ISP or ICP, so CPM can be easily calculated.

Advantages and disadvantages of CPA advertising

The CPA pricing method has certain risks for websites, but if the advertisement is successfully placed, the revenue will be much greater than that of the CPM advertising pricing method.

In order to avoid the risk of advertising costs, advertisers only pay the advertising site fees based on the number of clicks when Internet users click on the banner advertisement and link to the advertiser's web page.

However, while the CPA model fully considers the interests of advertisers, it ignores the interests of website owners and has been resisted by more and more website owners. Website owners are generally reluctant to use prime advertising space to place CPA ads for unpopular products, because whether the ad will trigger consumption behavior or other subsequent behaviors (such as registering an account, etc.) after being clicked does not depend on the website media, but on many factors of the product itself (such as the product's popularity and cost-effectiveness, the company's credibility, etc.) as well as the current acceptance of online consumption by netizens.

More and more website media are rejecting the CPA model after practice, and it is difficult to find suitable media for CPA paid advertising. Therefore, the CPA advertising model is risk-free for advertisers, but is not very popular among website owners.