The FOOA Conference: Advertising Pricing Models

Posted on June 10, 2007

FOOAI attended the Future of Online Advertising conference in NYC this past Thursday and one of the topics was advertising pricing models on the web. We’ve all heard the debate before. Should CPM, CPC, CPA, CP whatever be the pricing model? What model is the most efficient? Luckily Kim Malone of Google tackled the subject in her presentation and I think what she said made a lot of sense (and no, it’s not because I work for Google now - thought I should throw in the disclaimer).

She looked at the three main online ad models of CPM, CPC and CPA and discussed how they all make sense depending on what it is the advertiser is looking to accomplish. Kim looked at the pricing models as a funnel where CPM was at the top of the funnel (reach a ton of people to build brand) and CPA was at the end of the funnel (reach the folks looking to buy the product/service now). The basic idea was this:

CPM should be used if the advertiser is simply trying to make people aware of their products and services (i.e. build their brand). CPC should be used if people are aware of the product/service and the advertiser is looking for people to take some sort of action (visit the website, fill out a survey, etc.). CPA should be used if the advertiser is only interested in creating conversions (sales) and is not very interested in extending awareness of their brand.

That is an over simplification of course but you get the idea. All of the pricing models work together to help advertisers achieve what they need to achieve so the arguments over whether or not CPM makes sense and if CPA is the new CPC are simply non-issues. The ad pricing model really all depends on what the advertiser is trying to accomplish at a given time (and on what the media type is - i.e. CPM tends to work best in feeds as feeds are a brand building media).

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2 Comments so far
  1. Jay Meattle June 10, 2007 11:03 pm

    Eric, I was at FOOA too!

  2. […] week, just like my colleagues, I spent some time in the New York Office. There were plenty of things that were […]