This online advertising pricing model ensure advertisers only pay for their ad when those who view it complete the desired action. For example, if you visit a fitness attire website, you may see an ad in the top right corner for a related wellness supplement. If you don’t click on it, the advertiser who had it placed there (likely based on a key word you used when selecting to visit this website), doesn’t pay anything. However, if you click on the ad, the advertiser must pay according to the established rate.
In most cases, the “action” is a click – taking you from you current website to the advertiser’s space. However, the desired action could be completing a form, registering on a website, asking to be contacted, a sale, etc. High-traffic, high-converting web pages have a higher cost per action than the lesser known sites.
Cost per action (CPA) is usually tracked in with one of three methods. The most common is using cookies, which involves leaving a small piece of code on the user’s browser to be accessed later. Sometimes, telephone numbers are affiliated with specific campaigns, and the length of resulting phone calls can help determine if the action was beneficial to the advertiser. Another common method is the use of promotional codes. When you enter the code “shipping” at checkout, that marketing whiz knows exactly what drove you to his or her website.