The Basics of CPA Marketing
What is CPA Marketing?
We've already touched very briefly on the concept of CPA marketing but what does this term mean in detail? To start with, let's ask the simple question: What is an 'Action'? What is an 'Acquisition'? Another term that can be used synonymously with these two is 'conversion'. And if you've ever heard of a 'call to action', then this basically describes the same thing. A call to action is a call to do the thing you want your audience to do, which in the vast majority of cases is to buy a product or sign up to a mailing list. So with CPA marketing, you would first set up your goal or your action and then you would set up tracking so that you only paid when that thing happened. So for instance, if someone were to click on your advert, then get taken to your website and then buy your product, you would get charged. But if they were to click on your advert and then leave, you wouldn't get charged anything at all. As you might imagine, this is a rather positive situation for you as an advertiser.
You see, a click on its own does not guarantee any value for you. If someone clicks on your PPC advert, goes to your website and then is unimpressed with your products and services on offer, you'll have paid for that click and received nothing in return. On the other hand though, if you are only paying for each action, then you will be earning money for every time someone clicks on the advert. So if you can work out that you get $20 for every purchase of your e-book and you're paying only $1 for your CPA – then you know that every click on an advert will earn you $19. This works very well for you because you know you're getting money out of your advertising campaign and it works well with the advertiser who is still getting paid for your business.
Now here's the thing: CPA marketing doesn't always mean that you pay only when someone buys your product. In fact, that is relatively rare. Instead, with CPA you will still normally pay per click. That's what makes this still a form of PPC advertising (other than the simple fact that the two are very similar and it's convenient to describe them with the same term). So if you're paying per click, how is that CPA at all? Well basically, the advertising platform will give you the ability to break down the information and to see when you're actually gaining an acquisition. What this means is that you can then look at the percentage of clicks that are resulting in an acquisition and you can see what you're paying for each of those clicks.
So if you're paying $1 for every 100 clicks, and 1 in every 400 people buys your product, then you now know that you have a cost per action of $4. Is this a concrete and reliable number? While you might worry that this figure is based purely on trends, for any big business that is going to be good enough. If you're getting thousands of clicks a day and that average is calculated on that data, then it is almost always going to hold true. Sure, you will sometimes see a little deviation from this average as the cost goes up and down. But overall it's all going to even out over the long term.
This is in fact just the same way that a casino works – they play the odds but because those odds are on such a large scale and they are slightly tipped in favor of the house, they can still accurately predict their revenue.
How Does CPA Work?
Facebook for instance. And cookies are also the reason that the adverts that show up in the sidebar on Google are eerily close to all the things you're interested in. Been looking at holidays? Then a cookie will be stored on that website and they will then work with their advertising partners to show you hotel and flight adverts! In the case of
CPA, a cookie is used to look at how the person is that is clicking on your advert. Then, if the user with that identifying information should also click to buy a product on your website, they will have been tracked and the information will be fed back to the advertising platform. In a scenario where you only paid for each acquisition, you would then pay for those clicks only. More likely, the information would be fed back to your overall metrics along with all those clicks that didn't yield a result and you could then use this to calculate your CPA. So who are the advertisers and publishers? Who earns from this?
We'll look into the different CPA providers (called platforms) in more detail later but for now, suffice to say that the platforms tend to be run by big companies and websites such as Google and Facebook. If you use CPA through Google or Facebook, then your advert will be likely to appear on Google or Facebook respectively. In this case, it is of course also that company that will be paid for each click. In other cases, it is possible to use CPA marketing across multiple websites. Google AdWords is Google's advertising platform that shows ads right on its search pages, but
Google AdSense is a platform that shows adverts on the websites of participating publishers. So for instance, if you're someone who is selling a protein shake, you can use Google AdSense to have your adverts appear on websites about fitness. When you pay for your clicks/acquisitions, that money will then go to Google and the publisher.
What is Scrubbing and Shaving?
When paying only for your acquisitions/leads rather than per click, you may need to know what Scrubbing means that advertisers – you – don't have to pay for invalid or duplicate leads. So if you're paying for every person who signs up for your newsletter, then scrubbing means looking for instances where the same person has signed up twice, or where they have signed up with a fake e-mail. You then need to go back and not pay for that data. Likewise, if someone were to 'buy' your product but their card was then declined, you would again need to scrub that data to ensure you were really only paying for each acquisition. Here is where things can sometimes get a little complicated.
Meanwhile, shaving means that the advertiser is trying to be more selective about their leads and scrubbing leads that should be valid. This, of course, is unfair to the publishers.