What is Performance Based Advertising?
Just 10 years ago media skyline was easy to grasp. Dominated mostly by TV channels and big print houses selling ads in magazines and newspapers, the advertising was expensive and out of reach for most of the businesses. Alongside expensive ventures, brands and advertisers around the world have had trouble tracking how well their promotions are doing and what is the ROI (return of investment).
Digital marketing era coined a new term called performance-based advertising which allows marketers to keep track over ROI of their marketing campaigns.
Most simply put, performance-based advertising is a method of interactive advertising which is not dependent on the fixed price, but with a variable price that depends on the performance of the ad! For example, the cost of an ad can be based upon how often it is viewed on a webpage, how many times it was clicked, or how many leads and sales it converted.
A subset of performance-based marketing is affiliate marketing, a form of advertising which pays internet publishers (affiliates) to promote a particular product or service.
Performance Based Advertising pricing models
There are many ways to advertise and display products within the sphere of performance-based advertising. Each pricing model is a different way of making money and possesses its own advantages and disadvantages.
Here are the most common ones:
- CPM: cost per thousand views—the price depends upon how often the ad is displayed to the user
- CPC: cost per click—whenever a customer clicks on the ad
- CPL: cost per lead—whenever a customer provides contact info
- CPA: cost per action—generally a sale requiring credit-card info
Read more on Performance-based marketing and how to implement it in your marketing strategy
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