CPA (cost per action/acquisition) is a multi-billion dollar Internet marketing strategy. It has revolutionised how businesses generate leads and attract new customers. So, what does “cost per action” mean?
It means that advertisers only pay when a visitor performs an action on their website. Most common actions are a click on a link, signing up for a newsletter, or buying something.
For example, a company wants as many people as possible to sign up for their newsletter. So, they reach out to niche blogs or online influencers in their field of business to promote their sign up page. Whenever a user clicks on the affiliate link and signs up for the newsletter, the publisher gets paid.
Pros and cons of CPA marketing vs. revenue share (RevShare)
There are many online advertising platforms for both businesses and publishers. Most platforms utilise two advertising methods. One of the models is a cost per click (CPC) and the other cost per a thousand impressions (CPI). But, CPA is different because advertisers don’t pay for clicks or impressions. They only pay the publisher if the referred visitor converts to a paying customer.
It’s common for advertisers to pay publishers a percentage of the sale value for every sale. That entails a short-term commitment between the advertiser and the publisher.
On the flip side, the RevShare model implies a long-term commitment to pay the publisher a percentage of the revenue. For example, publishers who refer visitors to an online gambling service can receive a percentage of their losses. The percentage can range anywhere from 5% do 25%. That means a business would have to pay its affiliate $25.000 for revenue of $100.000.
The CPA and the RevShare models are win-win combinations for advertisers and publishers.
The CPA and the RevShare model have their downsides. The advertiser’s website plays an important role because it all comes down to conversion. If the conversion rate is low, the advertiser is sure to suffer some losses. In that case, advertises with low conversion rates might prefer a CPC model instead.
The CPA and RevShare models are more expensive than the standard CPC or CPI models. Visitors that convert to customers cost more than clicks or impressions. But, if the advertiser is good at converting visitors into paying customers, the price shouldn’t be a major issue.
Also, most publishers work only with reputable businesses that have high conversion rates. So, a business that has a low conversion rate might have trouble finding affiliates.
In general, the CPA model is riskier than the RevShare model. Publishers often prefer the RevShare model because it is more profitable. But, they tend to have trust issues with advertisers. They don’t know who they can trust. From the perspective of a business, it’s best to try both models and see which one attracts more visitors that convert to customers.
But, it’s important to note that CPA and RevShare models are not for everyone. To get the most out of both models, advertisers have to have an effective marketing strategy.