Fast-forward to 2021, it’s been 27 years since the first-ever digital ad — a display ad —was run on the internet. A feat that shows just how old internet advertising models are.
With over $350 billion spent in 2020 alone, internet advertising entails promoting one’s brand, products or services using paid advertisements over the internet.
Common forms of internet ads include banners, images, videos, links etcetera…
Today, internet advertisements are run through various channels on the internet such as search engines, social networks, ad networks, and even on small regular websites.
Just to put into perspective how big internet advertising has become, Facebook makes more than 98% of its 89 billion dollar revenue from advertisements.
While Google, the biggest advertiser in the world, makes more than 85% of its $182 billion revenue from ads.
This goes a long way to show just how effective paid ads are in helping businesses grow, acquire new customers, sell their products/services and create brand awareness.
In this article, I will be covering 5 popular internet advertising models, along with their use-cases, and of course, sprinkle a lil bit of pixie dust with examples.
Cost-per-lead (CPL)
CPL entails the amount of money one pays to acquire a single lead.
A lead is a prospective customer’s info such as an email address, that a company acquires for the sake of nurturing down the sales funnel.
You might wonder, how does this work?
You must have something of value that you’re willing to give to your prospects.
It could be an eBook, a webinar, templates, or some other piece of educational content.
This valuable item is what you call a lead magnet
Having curated the item which will be of value to your prospects, you’ll purchase an ad to let them know about and get access to the item in exchange for their emails.
This process is known as lead generation
Hence, you should use this internet advertising model purely for lead generation campaigns.
Assuming you spent $1000 on a lead generation campaign, and at the end of the campaign you end up getting 900 leads. In this scenario, your CPL would be $1.1.
Not shabby, I would say…
Cost-per-click (CPC)
This model entails the amount of money you pay for each click on your ad.
This advertising model is primarily used in Search Engine Marketing (SEM), or generally for getting sales, leads and product trials.
Assuming you spend $10,000 running an ad, and that ad gets 1000 clicks. Your CPC would be $10.
CPC, as an internet advertising model, is the primary model you use when advertising on Google and Bing.
Social networks like Facebook also offer CPC as one of their advertising models.
If you’re trying to get people to purchase your product or service, request a quote, or sign up for your free trial, then CPC is the ideal route to take.
CPC could range anywhere from $0.2 to as high as $100 depending on the industry, competitiveness and platform on which your ad is being run.
P.S – Clicks doesn’t always equate to sales. You could get a thousand clicks and still get only 10 sales. Use CPC with caution and for the right scenario. CPC, however, can generate fast results.
Cost-per-mille (CPM)
Perhaps the cheapest of all the advertising models, CPM is the amount of money you pay for every one thousand impressions (views) your ad gets.
You should use CPM for brand awareness, traffic generation and engagement purposes.
CPM is the primary internet advertising model on social media platforms.
You can use CPM to build engagement around your posts, raise awareness for your brand, or simply increase your video’s views.
Assuming you plan on spending $1000 on a marketing campaign, and at the end of the campaign, your ad garners 500,000 views (impressions). Then your cost-per-mille, which is the amount you pay for every one thousand views, would be $2.
P.S – You should not mistake impressions for the number of people reached. One person could view your ad a hundred times and that equates to a hundred impressions.
Cost-per-action (CPA)
Think of a pressing marketing objective you need to achieve.
It could be an email newsletter sign up, sale of a product, or webinar registration.
But let’s assume you want to sell a product priced at $5.
You could run a CPC-based ad directing traffic to your product landing page as that would be the optimal strategy, right?
Few hours into your campaign, you get a thousand clicks — presumably from a thousand people — let’s say at an average CPC of $2.
These people land on your product landing page and read through your copy, and even admire the product.
At the end of your campaign, however, only a hundred people made a purchase.
With this, you’ve only made a Return on Ad Spend (ROAS) of $500, and you’re still at a 75% loss when compared to your total advertising spend of $2000.
As you can see, this is one of the major disadvantages of CPC.
That notwithstanding, this is where CPA as an internet advertising model comes in.
CPA ensures that you only pay when a certain action has been completed.
In this case, you only pay when your product has been purchased.
Think of CPA as CPC on steroids, it removes all the downsides and places all the risk on the advertising platform.
Using the aforementioned analogy, you won’t pay for the one thousand clicks to your landing page.
What you will rather pay for are the one hundred purchases you got.
Assuming your CPA is still $2
In this case, you will have a ROAS of $500, which is now a 150% profit compared to your total advertising spend of $200
Wonderful, isn’t it?
Hence, you should use CPA when direct sales are involved.
Conclusion
There is no perfect formula for choosing the right internet advertising model
Neither is there such a thing as the perfect internet advertising model.
Choosing the ideal model for your campaigns depends on a mix of factors
These factors include the platform you plan on utilizing, your target audience, the type of product or service you’re offering, or perhaps, more importantly, your goals.
That notwithstanding, there are some common campaign objectives attributed to each specific internet advertising model — as highlighted in this article — that you should consider using.
