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Pricing Models
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Different pricing models in digital marketing are used to monitor, analyze, and discover marketing campaigns that work for a company. There are various types of pricing models that advertisers and publishers deal with:  
Model Pro Con Where Formula

CPM

Cost per Mile/Impression Advertiser pays a flat rate for 1,000 impressions
Original pricing model for economic reach Does not guarantee that the impressions have been seen by the consumer Common across the entire funnel Cost ÷ (Impression x 1000) = CPM

CPA

Cost per Acquisition/Action Advertiser pays only when a defined conversion takes place
Most cost efficient for advertiser. Advertiser only pays for actual performance High cost for advertiser. Does not give credit to other, non-direct costs. Most common with lower funnel tactics Total Ad Spend ÷ # of Actions = Cost per Action

CPI

Cost per Install Advertiser pays when a user intalls an app
Same as CPA Same as CPA Used for both upper and lower funnel activities. Total Ad Spend ÷ # of Installs = CPI

CPC

Cost per Click Advertiser pays based on how many times their ad was clicked
High level performance metric Pervasive fraud Top of funnel Cost of Ad Spend ÷ # of Clicks = CPC

CPV

Cost per View Advertiser pays in accordance with the number of “views”
Allows for some protection on costs to ensure actual viewing Expensive “Views” definition can change between publisher Upper Funnel Total Spend ÷ Total Measured “Views” = CPV

CPCV

Cost per Completed View Takes CPV a step further and ensures a view “completed”
Guaranteed attention and views Costly Lower funnel Total Spend ÷ Total measured “Completed Views” = CPCV

CPC

Cost Per Click

This model is where the publisher is paid based off of the number of times an ad is clicked on by consumers. Unlike CPM, where impressions count, with CPC, a consumer actually has to click the ad in order for an advertiser to pay. Advertisers also set a daily budget (number of clicks for their advertisement) and pays the publisher the amount if/when that budget is met. After the goal is met the ad is removed from the web

CPM

Cost Per Mile/Impression/Thousand

CPM is a model where an advertiser pays for a flat rate for 1,000 of their ads/impressions to be advertised. This method only relies on the number of times an ad is shown but does not take into account whether or not a consumer has clicked on the ad. CPM’s main focus is to spread brand awareness. CPM model relies on the amount of the advertisement that is displayed on a web page but does not mean the same thing as how many times a page is viewed. Impressions and Page views differ, an impression is the amount of times an advertiser places their ad on a page (there can be more than one impression on one page view).
  • Ability to target with precision
  • Affordable/low cost
  • Predictable conversion rates
  • Measurable results
  • Verifiable distribution

CPA

Cost Per Action

CPA is the model when a consumer has to complete an action ( sign up for a newsletter, complete a survey) and count as a lead for a sale in order for the model to count. This model has the lowest conversion rate and is also the highest cost for advertising because an action has to be completed and most of the time it asks consumers for personal information (DOB, email address etc). This model is best used for advertisers that have a collected consumer base at the BOFU. These consumers are the most likely to convert based off of their interest and loyalty from TOFU to BOFU.

CPI

Cost Per Install

CPI is the model that is specific for mobile apps only and advertisers only pay when a consumer installs/downloads an app. Since an advertiser only pays when a user installs an app, it is up to the ad network to place the ad in a place where conversion is more likely. In order for an ad network to place the ad in the right place, the company must have a solid idea of the types of consumers they aim to target. This means that CPI is not only mobile specific, but also BOFU specific.

CPV

Cost Per View

A method where an advertiser is charged for video advertisements in accordance with the number of views/interactions of the ad. Like other methods, a marketer will create a bid within the advertising system using keywords. When a consumer browses the web using those key words an ad is displayed for them. For common keywords the bid tends to be higher, and the highest bidder gets their ad displayed. Things like, geographic location also further restrict which ad is displayed for the consumer despite them using keywords when browsing. Since many video ads are now skippable after about 5-15 seconds, the majority of advertisers will pay after the consumer has viewed the video for about 30 seconds without skipping. Common viewing times:
  • IAB: 50% in view for 3 consecutive seconds
  • MRC: 50% in view for 2 consecutive seconds
  • Youtube: 7 seconds
  • Facebook: 3 seconds
Types of CPV that companies use for their ads:
  • In-Stream: Ads that act as online commercials and show up before or after the intended video (like on Youtube). Consumers are usually given the option to skip the ad after about 5 seconds.
  • In-Display: Ads that show up directly on a YouTube video and are clickable within the video.

CPCV

Cost Per Completed View

CPCV is a pricing model where an advertiser pays each time a consumer watches a video advertisement to full completion. Unlike other models, such as CPI or CPA, where an action has to take place or where the consumer has to interact with the advertisement, the advertiser only pays when the consumer watches the full video. This helps ensure that the consumer is receiving full impact of the video which results in a higher chance for conversion based off of the consumer’s interest.

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