What does CPA mean?
The CPA price is the amount that gets paid when an ad leads to a sale (or action). This means that a CPA advertising price can seem quite high compared to CPM or CPC. This is because conversions (sales) are quite rare comparatively.
For example, you book an ad campaign on a website and agree to pay £150 CPA every time an ad leads to a sale. The website will then show an unlimited number of adverts trying to make those sales. You (as the advertiser) will then report back to the website how many sales are made, and pay £150 for each of them.
The website will likely show your ads after all the ads which pay on a CPM or CPC basis. It is entirely up to them how many ads they show however. Generally the deal will not be to make a specific amount of sales, just to try and make as many as possible.
This is the most advantageous type of deal for advertisers to make in most cases.
CPA Definition (Cost per Acquisition or Cost per Action)
CPA means cost per acquisition (or sometimes cost per action) and it means paying for ads only if it leads to a sale (or other goal). It is one of the three most common ad pricing models used along with CPM and CPC. Most sites will not take CPA ads as they are a risky proposition, but there are many times when they can be very profitable for both site and advertiser.
However CPA ad is also known as cost per action advertising as it can also be used to get users to do any action. Actions could include donate money to charity, or sign up for a supermarket club card.
The equation for CPA ads is:
Click to enlarge
CPA = Ad Spend / Conversions
There are two types of conversion:
- Post-click conversions – This means a user has clicked on an ad and then made a purchase/completed an action.
- Post-impression conversions – This is when a user sees the ad, and then at a later date completes a purchase/action.
In the majority of deals the conversion does not have to happen immediately. How it works is that when the cost per acquisition ad is shown to a user it will drop a cookie on the users computer. This cookie then starts a countdown. If the user completes a purchase/action before the countdown finishes, then the website the ad was on gets paid.
Of course an advertiser may run the same ads on many sites, and it won’t pay out many times for one conversion (if the ad was seen by the same user on many sites). Only be the last site that a user clicked on, or saw an ad impression will get paid.
Average CPA rates
CPA rates are too variable to list. They will depend on the ROI of an advertiser, which will depend on the value of the conversion they are chasing. Due to this you can expect to pay/receive anywhere between £0.50 and £50!
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Author: Justin Driskill
Justin is the founder of The Online Advertising Guide and a freelance Digital Projects Manager.