Internet Advertising Revenue Model

April 27, 2018

Internet has become a source of engagement and growing user base. Advertisers definitely want to capitalize on such activity or traffic. There are ads all over the internet. Few are colorful images, few are text links, and few are even videos. Now, how does the advertiser pay the publisher(one who places the ad on his/her site), and on what basis?

There are three popular models used to share revenue with the publisher. They are CPM, CPC, and CPA, here is a list of all the revenue models currently in force

CPM (Cost per Mille) or CPT (Cost Per thousand Impressions): An impression is the measure of how many times an ad is displayed. Advertisers using CPM or CPT model, pay the publisher for every thousand(Mille) impressions of their ad, irrespective of whether someone has clicked on it or not. All impressions may not be counted (such as page refresh)

CPV (Cost per Visitor): The publisher gets paid when a targeted visitor (say of a particular geographical area) visits the advertiser's website.

CPV (Cost per View): The publisher is paid for every unique view of the ad. This is usually used model for pop-up ads

CPC (Cost Per Click) or PPC (Pay Per Click): This is most sought after(and also misused) revenue model by publishers. The advertiser pays the publisher when an user click on the ad and is redirected to their website. Advertisers do not pay for listing, but only for clicks. This offers the advertising specialists, the scope to target specific viewers. CPC allows advertisers to be listed under target keywords, which would direct relevant traffic to their site. They only pay when such users click on the ad and visit the site.

CPA (Cost Per Action or Cost per Acquisition): This is a very common form of revenue model, used in affiliate advertising, where the publisher is paid only if the user/viwers complete a transaction on their site. This might be signup, or purchase. Here the publisher takes the risk of running the ad. Inefficiencies in the sellers webiste conversion funnel are not taken into account. Common Variants of CPA are:

  • CPL (Cost Per Lead)
  • CPS (Cost Per Sale) or PPS (Pay Per Sale)
  • CPE (Cost Per Engagement)

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