Online Ads 101: Cost models for online media

Online Ads 101: Cost models for online media


Nothing in life is free – and this is particularly
true of online advertising. Ad space is sold by website publishers – including newsites,
blogs, weather, sports sites, and so on. Publishers charge different rates for their
ad space. How they calculate costs depends on their clients’ goals. If an agency wants to boost brand awareness
by wallpapering the internet with their client’s advertisements, they’ll probably use the CPM
model. CPM stands for Cost Per Thousand Impressions… the Thousand is silent ;). An example CPM
might be $10.00 to secure top space on a popular website’s homepage. If the client is more focused on response
rate – like driving traffic to a new part of their website – the agency may use the
CPC (Cost Per Click) model. An example CPC might be ten cents per click. Advertisers may use what’s called the CPA
model when they want more bang for their buck. This might be a desire to drive sales, increase
email sign-ups, or get people to request a quote online. All of these events are valuable,
depending on the client’s goals. We call these valuable events *Conversions*. For example, the publisher gets paid when
the visitor sees the ad on their site and makes a purchase. There’s no guarantee that someone is going
to click an ad, let alone buy something on the advertiser’s site. Because of this, publishers
take on more risk when using the CPC or CPA models. This is why CPC and CPA rates are typically
more expensive than CPM rates. CPM, CPC, and CPA – these three little acronyms
make a big difference in how publishers get paid.

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