Cost Per Action (CPA)

Cost Per Action or CPA (sometimes known as Pay Per Action or PPA) is an online advertising pricing model, where the advertiser pays for each specified action (a purchase, a form submission, and so on) linked to the advertisement.

Direct response advertisers consider CPA the optimal way to buy online advertising, as an advertiser only pays for the ad when the desired action has occurred. An action can be a product being purchased, a form being filled, etc. The desired action to be performed is determined by the advertiser.

The CPA can be determined by different factors, depending where the online advertising inventory is being purchased

CPA as "Cost Per Acquisition"

CPA is sometimes referred to as "Cost Per Acquisition", which has to do with the fact that most CPA offers by advertisers are about acquiring something (typically new customers by making sales). Using the term "Cost Per Acquisition" instead of "Cost Per Action" is not incorrect in such cases, but not all "Cost Per Action" offers can be referred to as "Cost Per Acquisition".

Differences between CPA and CPL advertising

In CPL campaigns, advertisers pay for an interested lead (hence, Cost Per Lead) — i.e. the contact information of a person interested in the advertiser's product or service. CPL campaigns are suitable for brand marketers and direct response marketers looking to engage consumers at multiple touchpoints — by building a newsletter list, community site, reward program or member acquisition program.

In CPA campaigns, the advertiser typically pays for a completed sale involving a credit card transaction.

There are other important differentiators:

1. CPL campaigns are advertiser-centric. The advertiser remains in control of their brand, selecting trusted and contextually relevant publishers to run their offers. On the other hand, CPA and affiliate marketing campaigns are publisher-centric. Advertisers cede control over where their brand will appear, as publishers browse offers and pick which to run on their websites. Advertisers generally do not know where their offer is running.
2. CPL campaigns are usually high volume and light-weight.In CPL campaigns, consumers submit only basic contact information. The transaction can be as simple as an email address. On the other hand, CPA campaigns are usually low volume and complex. Typically, consumer has to submit credit card and other detailed information. 

Effective cost per action

A related term, eCPA or Effective Cost Per Action, is used to measure the effectiveness of advertising inventory purchased (by the advertiser) via a CPC, CPI, or CPM basis.

In other words, the eCPA tells the advertiser what they would have paid if they had purchased the advertising inventory on a Cost Per Action basis (instead of a Cost Per Click, Cost Per Impression, or Cost Per Mille/Thousand basis).
Companies

• Dozens of smaller companies have addressed the majority of the cost-per-action advertising network market, including companies like Commission Junction, Performics, and others including new entrants such as W4, Advertise.com and Perfect Storm Media.
• Google started testing CPA on 2006. On June 2007 Google expanded its beta trial, opening it to users of AdWordsAs of October, 2008, Google has discontinued their pay-per-action beta in favor of an offering by Google-owned DoubleClick.
• Mobpartner started the mobile CPA business in 2005 and is now the world leader in mobile affiliation with over 110.000 offdeck publishers (on 130 countries), over 50 CPA ongoing campaigns and 600 millions impressions per month. Our purpose is simple - connecting advertisers with their audience and helping publishers maximise their earning potential. Based on CPA model, mobpartner minimizes the risk for advertisers, and allows publishers to fill their unsold traffic easily. They give users the flexibility and control they need to achieve these goals.
• eBay has moved into CPA advertising with its AdContext system on 2006.
• Snap.com, CPA pioneer and later merged with other to form NBC Internet (NBCi), has long touted the advantages of the CPA model, such as the elimination of click fraud.
• Jellyfish.com was the Internet's first comparison shopping search engine to operate exclusively on a Cost Per Action (CPA) ad model, has a patent pending on an improvement over CPA where part of the ad revenue goes to the customer, and has been bought by Microsoft for integration into Live Search.

See also

• Affiliate marketing
• CTR - Click-through rate
• CPC - Cost Per Click
• Cost per conversion
• CPI - Cost Per Impression
• CPM - Cost Per Thousand
• CPT - Cost Per Time
• eCPA - Effective Cost Per Action
• eCPM - Effective Cost Per Thousand
• CPD - Cost per Day
• Internet marketing
• PPC - Pay Per Click (Search engines term for CPC)
• PPS - Pay Per Sale/Cost Per Sale
• Revenue Share - Cost derived from advertiser income
• VPA - Cost Per Action variation that transparently balances incentives between vendors and consumers
• Compensation methods 

 References

The Online Lead Generation Glossary

Tutorial on the CPA / CPM / CPC / dCPM advertising models

http://en.wikipedia.org/wiki/Cost_per_action  
^ "Advertise.com Extends into CPA", retrieved December 30, 2009  
^ Information Week: Google Confirms Testing New Ad-Pricing Model, retrieved March 18, 2008  
^ What happened to the pay-per-action beta?  
^ [1]  
^ ^{a b} Startup Primed To Challenge Google CPC Ad Model, retrieved March 18, 2008  
^ Jellyfish.com Partners With Channel Intelligence, retrieved March 18, 2008