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Cost per acquisition (CPA), also known as cost per action, pay per acquisition (PPA) and cost per conversion, is an online advertising pricing model where the advertiser pays for a specified acquisition - for example a sale, click, or form submit (e.g., contact request, newsletter sign up, registration etc.)
Direct response advertisers often consider CPA the optimal way to buy online advertising, as an advertiser only pays for the ad when the desired acquisition has occurred. The desired acquisition to be performed is determined by the advertiser. In affiliate marketing, this means that advertisers only pay the affiliates for leads that result in a desired action such as a sale. This removes the risk for the advertiser because they know in advance that they will not have to pay for bad referrals, and it encourages the affiliate to send good referrals.
Radio and TV stations also sometimes offer unsold inventory on a cost per acquisition basis, but this form of advertising is most often referred to as "per inquiry". Although less common, print media will also sometimes be sold on a CPA basis.
CPA is sometimes referred to as "cost per acquisition" or "cost per action", which has to do with the fact that many CPA offers by advertisers are about acquiring something (typically new customers by making sales).
Cost per acquisition (CPA) is calculated as: cost divided by the number of acquisitions. So for example, if one spends £150 on a campaign and gets 10 "acquisitions" this would give a cost per acquisition of £15.
Pay per lead (PPL) is a form of cost per acquisition, with the "acquisition" in this case being the delivery of a lead. Online and Offline advertising payment model in which fees are charged based solely on the delivery of leads.
In a pay per lead agreement, the advertiser only pays for leads delivered under the terms of the agreement. No payment is made for leads that don't meet the agreed upon criteria.
Leads may be delivered by phone under the pay per call model. Conversely, leads may be delivered electronically, such as by email, SMS or a ping/post of the data directly to a database. The information delivered may consist of as little as an email address, or it may involve a detailed profile including multiple contact points and the answers to qualification questions.
There are numerous risks associated with any Pay Per Lead campaign, including the potential for fraudulent activity by incentivized marketing partners. Some fraudulent leads are easy to spot. Nonetheless, it is advisable to make a regular audit of the results.
In cost per lead campaigns, advertisers pay for an interested lead (hence, cost per lead) -- i.e. the contact information of a person interested in the advertiser's product or service. CPL campaigns are suitable for brand marketers and direct response marketers looking to engage consumers at multiple touch points -- by building a newsletter list, community site, reward program or member acquisition program.
In CPA campaigns, the advertiser typically pays for a completed sale involving a credit card transaction.
There are other important differentiators:
Pay per click (PPC) and cost per click (CPC) are both forms of CPA (cost per action) with the action being a click. PPC is generally used to refer to paid search marketing such as Google's AdSense or Ad Words. The advertiser pays each time someone clicks on their text or display ad.
When advertising in the Google platform, CPC bidding means that an advertiser pays for each click of an ad placed and that, in ad campaign, he can set a price cap as a maximum CPC bid. Here, the CPC pricing is also sometimes referred to as PPC. In the Facebook social networking platform, the term pertains to the average cost for each link click and it serves as a metric in online advertising for benchmarking online ad efficiency and performance. CPC in the Amazon Marketing Service (AMS) follows the same model, although it is reported that this platform charge lower CPCs compared to other advertising platforms with Google charging the highest.
Also, pay per download (PPD) is another form of CPA where the user completes an action to download a digital content such as apps, digital media, and other files. The actions can include completing surveys or answering quiz in order to generate revenue from a third-party advertiser.
With payment of CPA campaigns being on an "action" being delivered, accurate tracking is of prime importance to media owners.
This is a complex subject in itself, however if usually performed in three main ways:
A related term, effective cost per action (eCPA), is used to measure the effectiveness of advertising inventory purchased (by the advertiser) via a cost per click, cost per impression, or cost per thousand basis.
In other words, the eCPA tells the advertiser what they would have paid if they had purchased the advertising inventory on a cost per action basis (instead of a cost per click, cost per impression, or cost per mille/thousand basis).
If the advertiser is purchasing inventory with a CPA target, instead of paying per action at a fixed rate, the goal of the effective CPA (eCPA) should always be below the maximum CPA. As described by Yang's Law, eCPA<CPA. This fundamental view of what the performance of conversion-based campaign should be is served as the baseline for many buy-side platform optimization algorithms.
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