CPA: Winners and Losers

Every advertiser is looking for a CPA deal these days. The cost-per-action model has become a popular buying strategy for many web advertisers. What it means is that publishers get paid not on how many times an ad is seen or even on how many times it's clicked, but according to how many people click on it and take action on the advertiser's site. The question for publishers is: Does this pricing model work for me?

Stats to Chew On

Many people have discussed various aspects of this topic, but I thought I would go right to the numbers.

I manage a permission-based marketing network that allows advertisers to reach their target audience via text-based email, banners, sponsorships, or interstitials. Most of my advertisers target a very specific audience, e.g., males over 30 years old who make more than $60,000 per year and work in the energy industry.

To get a feel for the value of CPA, I examined the last 50 campaigns we ran on a CPA basis. I then took all of these campaigns and turned them into CPM campaigns by determining the number of impressions it took to reach the target number of actions. Here's what I found:

• CPA campaigns that ran as banners (468x60 or 120x60) had an average effective CPM of $.78 (highest campaign was $1.80, lowest was $.03).
  
  
• CPA campaigns that ran as interstitials had an average effective CPM of $1.90 (highest was $8.01, lowest was $.40).
  
  
• CPA campaigns that ran as email sponsorships had an average effective CPM of $5.90 (highest was $39.06, lowest was $1.08).

To further the analysis, I split the CPA campaigns into two groups according to whether the target action was "hard" or "soft." A "hard" action was anything that required an audience member to provide a significant amount of information. This category included making a purchase, filling out a credit card application, or completing a multipage registration form. "Soft" actions were things like contest sign-ups or registration forms with fewer than 15 fields.

When I looked at the effective CPMs in this manner, here is what I found:

• "Hard" campaigns that ran in any format had an average effective CPM of $1.20 (highest was $10.01, lowest was $.03).
  
  
• "Soft" campaigns that ran in any format had an average effective CPM of $5.08 (highest was $39.06, lowest was $2.10).
  
  
• "Soft" campaigns that ran as email sponsorships had an average effective CPM of $12.09 (highest was $39.06, lowest was $6.07).

So what does all this data tell me?

• CPA can be an effective model if the campaign includes a worthwhile, relevant offer that's easy to sign up for.
  
  
• Email sponsorship is the best "call to action" format.
  
  
• Be leery of advertisers wanting to run banners just on a CPA basis. Banners provide branding and image beyond their CPA value, and advertisers understand that. If they get a publisher to accept a CPA deal on a banner, they usually will get more than they're paying for.
  
  
• Publishers who are very selective as to what CPA campaigns they will accept should realize money can be made on them.

If you're a publisher considering whether you can offer CPA deals, follow these guidelines:

• Look at the ad in question and ask yourself if you would sign up. If you wouldn't, then others probably wouldn't either.
  
  
• Make sure the link on the ad goes directly to the action page and not to a home page. It's all about making the process simple for the audience.
  
  
• Analyze the creative and make sure it has a strong call to action, one that will get people to go to a site to do something.

CPA deals put a lot more pressure on the publisher. It forces them to analyze each campaign carefully to determine how much money they will make. Before you run any CPA campaign, make sure you can make money.
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