CPA stands for cost per action and is a form of advertising where the company only pays a publisher when a certain action is carried out. This means that no matter how many people click through to their website, the company will only be paying out if a sale is made or a lead is generated.
Unlike other forms of online advertising, CPA has a higher conversion rate because the prospects are already open to the idea of making a purchase. This is because they have already been presold by the affiliates, who also want their traffic to convert, as this is the only way they can earn money. It essentially puts the advertiser and the publisher on the same page, both working towards the same goal.
On the other hand, an advertising medium such as pay per click, or PPC, functions just like a regular newspaper classified advertisement. In other words, an advertisement is drafted and then published, and, depending on quality will help to drive traffic to an offer or sales page.
Unlike CPA advertising, though, traffic arrives cold and the likelihood of conversion is much lower. Another disadvantage is that every click has to be paid for, no matter if the prospect signs up, purchases or leaves.
CPA advertising is preferred by advertisers for the simple reason that it gives better control over their bottom line. They know they will only be paying out if they have made a sale and thus their advertising costs are no longer indirect costs and part of their overhead, but variable costs linked to a sale. Essentially, the advertiser is placing all of the risk on the publisher and for this very reason, the commissions are much higher than with PPC models.
What is the Point?
As this site is aimed at making money online from CPA, the above information may seem redundant. However, as a publisher working with CPA advertising, you will be taking on all the risk and effectively acting as both the sales and marketing department of the advertiser.
Therefore, it pays to understand the reasoning behind CPA as an effective business model. The more you understand, the easier it will be for you to create effective campaigns that net you significant profit.
Benefits for the Publisher
Since CPA advertising seems to generate a lot of risk for the publisher it may not seem to be the best way to earn an online income. However, nothing could be further from the truth because the difference in commission alone can net a good affiliate in one day the same income they need weeks to generate with PPC. As an example, a CPA offer may pay out above $50 per lead or sale, whereas a PPC ad may earn $0.05 per click, on a good day.
Another advantage to featuring CPA ads on your website is that the advertisers working with the CPA model are usually big names, which increases the authority of your website, but more importantly will guarantee substantial payouts.
One thing is true, though, entering the CPA arena takes a completely different mindset than other online earning systems. It is closer to running a business than it is to holding down a job. For this reason, it is compulsory that you always see the big picture and the outcome you desire or you will get lost in the details.
Additionally, the big CPA networks will also work closely with their publishers to help improve their conversion rates so that everyone may benefit. If an advertiser is unhappy with the traffic or the conversion rate of that traffic, they may decide to move to another network. Therefore, all three parties have a vested interest in making the system work and thus everyone earns a profit.
How It All Works
CPA ads are run by companies that specialize in placing these advertisements, known as CPA networks. A CPA network is basically the online equivalent of a media broker, who brings the advert to the advertising space.
An advertiser will approach a CPA network to market their service or product and their desired outcome is to either make sales from the campaign itself or to generate a list of targeted and qualified leads. For the short term, the first approach would be the most suitable.
However, a list of targeted, qualified leads will produce revenue for many years to come as long as the relationship is maintained. This is the reason companies are willing to pay substantial commissions out to publishers who prove they can generate good leads.
The CPA campaign will run either for a set number of actions, in other words until 1,000 leads have signed up or 100 sales have been made, or it will continue until a certain expiry date.
As previously mentioned, there are two main actions that companies pay a commission for, when they are completed. The first is a sale and the second is lead generation. In fact, CPA is considered the best method to generate mailing lists of targeted, qualified prospects. Usually, the commission is a flat fee in both cases, with percentage based payouts being quite rare.
After having looked at the outcome the advertiser will pay for, it is time to move on to understand the type of action a prospect will have to take for the outcome to be achieved. CPA offers are usually differentiated according to the action the prospect is required to take.
Some of these take longer and require more of the potential lead or customer, making it more risky for the prospect, whereas others require minimal action and have a higher conversion rate. Of course, the more difficult it is the higher the commission will be.
These are the simplest types of CPA offers that offer a commission for every valid email address that is submitted through their advertisement from traffic you generated. E-mail submits have a very low payout per lead, but since very little is required of the prospect, the conversion rates tend to be astronomical. Thus, you will make up in volume what you lose in commission level.
These are virtually identical to e-mail submits, except that the customer needs to enter a valid ZIP code. The commissions are relatively low but again, since little is required, conversion can more than make up for the low payout.
Short Form Offers
Short form offers require a little more information from prospects than e-mail submits, such as name, address, date of birth and gender. These offers generally do not require credit card details. The commission level varies but is in the medium range.
Long Form CPA Offers
These offers require much more information from the prospect and can usually mean low conversion rates, much lower than simple email submits, in any case. However, the payout is also substantial because though the conversions are low, those that do convert will become highly qualified and relevant leads.
There are CPA offers, which require the prospect to download a piece of software that is offered for free. The software usually contains some form of advertising, but it is not classified as malware or spyware as it can easily be removed at any time.
The publisher gets paid for every download of the software. This can be a very lucrative prospect for the publisher, if the right audience is being targeted, because the prospect is not required to enter any personal details.
These CPA offers are used when downloading to a mobile phone. The prospect registers with their mobile number and a PIN is sent to the number. This PIN needs to be entered when downloading a ring tone, for example. PIN submits also offer medium range commissions, from $2 to $10 per download.
Contrary to popular opinion, free trial offers are still available. However, they must conform to certain FTC regulations, namely that customers will not be signed up for rebilling unless the offer clearly states that this will be the case.
It is also mandatory that the customer can easily cancel rebilling at any time. Of course, this means that free trials are no longer as lucrative for affiliates because, essentially, these companies were tricking customers into purchasing their product or service.
Unfortunately, these companies did not understand the meaning of relationship marketing and how the ROI on a single customer can be much higher when trust is present.
These types of CPA offers generally require one of the above actions, but the advertiser allows affiliates to offer prospects a bonus for taking the required action.
Bonuses can be anything from information to cash or anything in between. These types of offers can be quite lucrative because even if your profit is lower that with other offers, conversion rates can be quite high.
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