Posted on Thursday 6th of December 2007 at 08:09 in Make Money Online

CPC vs CPA and the use of both with PPC

Christmas is nearly upon us and as a consequence the retail industry is thriving. So it seems only right to support this period of purchasing with some content supporting the lucrative CPA model for both publishers and vendors.

An important question for most bloggers is "how can I make money from my website?" with most people favouring the tried-and-tested medium of CPC. Networks like Google Adsense provide easy to install, low maintenance CPC platforms for bloggers to implement; meaning they can profit whenever a user clicks an advert.

The downside to CPC
While CPC is scalable with traffic and fairly consistent it's difficult for regular webmasters to make any meaningful money with it without astonishing levels of traffic. Invasive positioning and carefully research keywords may help (allowing you to leverage the contextual engine Adsense uses) to improve the return, but ultimately you'll be hard pressed to get over $1 per click. So unless you've got an unbelievably invasive ad-spot or epic levels of traffic - CPC is unlikely to deliver more than pocket money.

So what is CPA?
CPA stands for Cost Per Action and is an increasingly common marketing model for average users; the basic premise is that money only changes hands when a pre-defined action has taken place. So when Dell have a CPA campaign offering 3% commission on sales, no money changes hands until that sale is made. Once the sale goes through then the publisher who referred the user is given 3% of the sale, clearly this differs to the Cost Per Click model.

Benefits of CPA for vendors
The real benefit over running a PPC campaign is that you're not dedicating a massive amount of money speculatively; you're not putting £3,000 down in the hope that your campaign is going to see a return. Using the CPA model you're only paying out when someone has bought something, meaning you're automatically operating in profit. So say you're pulling 30% profit from a sale: you already have that profit in hand before you have to return the 3% to the referring publisher. So CPA carries much less risk than other models.

Benefits of CPA for publishers
While CPC is relatively consistent it seldom delivers usable amounts of money. CPA on the other hand can deliver as much as £100 for a completed transaction so while it is understandably more lucrative than other models (especially CPM) it also carries a much bigger payoff. It also means that you can happily blend the adverts into the content using text links (where you often pass an affiliate ID in the URL). So it doesn't look like an advert - therefore not upsetting users - and people click through to it unaware that their actions could benefit you in some way. With the right market you can make millions of dollars a year with correct use of affiliate schemes.

CPA and PPC together is a good prospect
You can't really be profitable using PPC and CPC because you're ultimately using the same system. If you're running a PPC campaign that lands users on a page optimised using CPC adverts; it's a very tight margin. Considering you're probably paying $0.05 - $0.10 per click for PPC, you're unlikely to get more than $0.25 as a CPC payout. You'd need 50% of users to click your ads to be profitable.

However, using a CPA model you can target specific niche keywords and keep your CPC expenses as low as possible while maintaining the highest level of relevancy. Higher relevancy = higher conversion rates. Therefore you can target the right keywords to the right schemes. The payouts are a lot higher than CPC and the conversion should be better - therefore it's ideal.

CPA, PPC and landing pages
Another advantage of using CPA with PPC is that you can (more often than not) direct your PPC campaign directly to the vendor in question. So if Dell are running an affiliate campaign on a CPA model, I can link my PPC campaign directly to a specific page on the Dell website and completely avoid the various perils of my own landing page (obviously using my own affiliate ID/tracking code).

Hopefully this has helped to explain the use of the CPA model for both publishers and vendors; frustratingly lucrative yet beneficial for the former, marvelously low risk for the latter.

 

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