Tagged 'revenue sharing'

Reviewing the Current Online Advertising Economic Models

Posted by Michael Sprouse on April 29th, 2010 at 12:00 am

On the heels of the recent merger of Connexus Corporation (Traffic Marketplace) and Epic Advertising, I would like to discuss the merits of each of the current online advertising pricing models. Years ago, sales teams and media buyers used a simple model where ad inventory for print or broadcast television were normally sold on a Cost Per Thousand Impressions (CPM) basis, against a rate base and rate card. Once the rate was negotiated, the deal was culminated in the ad being placed. With the recent rapid growth in online advertising, we have entered an era where the "click" and "action" were introduced as an added means of payment and campaign measurement. Let's review how each pricing model is used and our predictions for the future of online advertising pricing models.
Cost Per Action (CPA): Initially, this pricing model was seen as the truest form of online direct response advertising. CPA was the also the closest comparison to direct mail, and therefore attractive to the large number of DR-focused advertisers on the web.  CPA provides little financial risk to advertisers as they only pay the publisher, network or exchange for a quantifiable action (usually in the form of a sale, subscription, download... Read more