When should I be buying ads on a CPA basis?
The simple answer is: when you have the opportunity and the technology.
Buying ads on a CPA basis seems like a no brainer: you only pay for ads when they make you money – what could be better! More so than even CPC campaigns, CPA ad buys ensure a good return on investment, however it is of course not that simple. CPA ads will cost you more time and investment than CPM or CPC ads, because they come with a lot of admin, and the need for technical know-how.
CPA ads cost you time mainly because comparatively few sites will take them. You will therefore need to shop around for sites who are willing to take them, and then you need to support them so it is a good deal for both you and them. You will also need administer conversion attribution – as in working out which sale come from where and paying out accordingly.
How do I manage a CPA deal?
In the most simple version of a CPA deal, you would run your ads on only one website and it would link to a specially set up URL, so you could say that any sales which came from that URL are the result of the ads on that site. Even in this case however, how is the site meant to optimise your ad campaign (as in make sure you get as many sales as possible)? Unfortunately clicks often do not line up with conversions, so even if they work hard to improve your CTR, it may not in fact improve your conversions.
You therefore have to allow the website you deal with to put a conversion pixel on your sales confirmation page. This is a piece of code they generate from their ad server which allows them to see on their end which ads/pages/time/day led to a sale and adjust accordingly. Putting this conversion pixel on your site then allows you to jump to a more complicated form of this deal – putting your ads on many sites and having post-impression and post-click windows.
It may seem at first that you don’t want to pay for post-impression and post-click windows, but not only are they the only fair way to compensate sites, you also need to make the deal more fair to sites in order for them to take them. Ultimately you are still generally getting a great deal out of CPA campaigns, so the more you support the sites running them, the better it is for everyone. The common post-impression window is 30 days, and for post-click it is 15 days, but you should adjust this to fit your own sales pattern. Remember: you want them to make sales so giving the sites accurate information helps you as much as them.
Speaking of which – it is pretty common practice among large advertisers to provide a sort of league table to all the websites they are running a CPA deal with. This would be a monthly list of the amount of conversion each site has made, as well as the number of clicks and impressions. It may make sense for you to keep this information secret, but in many cases it’s very handy for each site to be able to benchmark themselves against others. This can help them to know if they are doing well or not, and encourage them to try harder (if they are at the bottom of the table especially)!
This leads to the next problem – attribution. You don’t want to pay each website every time their ads leads to a sale, so you will have to run your ads through a third party server which is able to track conversions and remove duplicates sales. This is pretty common, but it is something you will have to pay for. Just make sure that the amount of sales they tell you that you made lines up with the amount of sales your own records show. Also keep in mind that the sites you are advertising on will likely think they have made more conversions than they have, so you’ll have to explain this whole thing to them (be nice, it’ll annoy them!).
The equation for CPA ads is:
Click to enlarge
CPA = Ad Spend / Conversions
What CPA price should I pay?
You should pay whatever price gives you a good return on investment. If you are selling a £20 DVD, then your CPA will have to be less than that to make a profit.
You should of course factor in all the other costs associated with the ad campaign/administration too to work out your ROI. These would include shipping/delivery costs, making the ad, paying the person planning/administering the campaign and paying the third party ad server.
Which leads us to the final difficulty to do with CPA campaigns – unlimited ad impressions. In a lot of ways it is an advantage to you that websites will show your ad as often as possible to get as many conversions as possible.
However, as you will have to run your ad through a third party ad server, each ad impression will cost you. This cost is generally pretty tiny (fractions of a penny), but with a CPA campaign, more so than a CPC campaign even, websites can serve an incredible amount of impressions as they will likely not cap them at all. It is therefore important to keep a close eye on this, and make sure that your ROI stays in good shape.
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