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3.4 How to Pay

Learning Objective

  1. Understand the different types of online payment models.

Payment Models for Display Advertising

As well as a variety of mediums, there are also a number of different payment models for display advertising.

Cost per Impression or Cost per Thousand Impressions

Cost per impression (CPI)This means the advertiser pays each time the advertisement appears on the publisher’s page. means that the advertiser pays each time the advertisement appears on the publisher’s page. The most common way of referring to this model is cost per mille (CPM)Cost per thousand ad impressions. An advertiser pays each time a thousand impressions of their ad are shown., or cost per thousand impressionsThe number of times a Web page or ad is viewed. (the letter M is the Roman numeral for a thousand, or mille). This is how a campaign is normally priced when brand awareness or exposure is the primary goal.

Cost per Click

Cost per click (CPC)When an advertiser only pays when their ad is clicked upon, giving them a visitor to their site—typically from a search engine in pay-per-click search marketing. means that the advertiser only pays when their advertisement is clicked on by an interested party. CPC advertising is normally associated with paid search marketing, also called pay-per-click (PPC) advertising. Banners can be priced this way when the aim is to drive traffic. It is also a payment method sometimes used in affiliate marketing, when the aim is to drive traffic to a new Web site.

Cost per Acquisition

In the cost per acquisition (CPA)The cost of acquiring a new customer. The advertiser only pays when a desired action is achieved (sometimes called cost per acquisition). model, the advertiser only pays when an advertisement delivers an acquisition. Definitions of acquisitions vary from site to site and may be a user filling in a form, downloading a file, or buying a product. CPA is the best way for an advertiser to pay because they only pay when the advertising has met its goal. For this reason it is also the worst type for the publisher as they are only rewarded if the advertising is successful. The publisher has to rely on the conversion rate of the advertiser’s Web site, something that the publisher cannot control. The CPA model is not commonly used for banner advertising and is generally associated with affiliate marketing.

Flat Rate

Sometimes, owners of lower-traffic sites choose to sell banner space at a flat rateA fixed cost per month regardless of the amount of traffic or impressions., that is, at a fixed cost per month regardless of the amount of traffic or impressions. This would appeal to a media buyer who may be testing an online campaign that targets niche markets.

Cost per Engagement

Cost per engagement is an emerging technology in which advertisers pay for the rollover advertisements, placed in videos or applications (such as Facebook applications), based on the interactions with that advertisement. “EngagementImplies a level of interaction and intent from the user.” is generally defined as a user-initiated rollover, or mouseover, action that results in a sustained advertisement expansion. Once expanded, an advertisement may contain a video, game, or other rich content. It happens without taking an Internet user away from her preferred Web page, and marketers only pay when an individual completes an action.

The word “engagement” implies a level of interaction and intent from the user. If you were using this type of advertising, how would you measure success?

CPM favors the publisher, while CPA favors the advertiser. Sometimes, a hybrid of the two payment models is pursued.

Typically, high-traffic, broad-audience Web sites will offer CPM advertising. Examples include Web portals such as or news sites like Niche Web sites with a targeted audience are more likely to offer CPA advertising to advertisers with an appropriate product. These can also fall under the umbrella of affiliate marketing.

How do you think your campaign objectives would differ if you were advertising car insurance versus organic cat food? What sort of Web sites would you target for each?

Types of advertising can be seen on a scale from more intrusive (and thus potentially annoying to the consumer) to less intrusive. In the same way, payment models can be scaled to those that favor the publisher to those that favor the advertiser. When planning a campaign, it is important to know how the advertising will be paid for and what kinds of advertising are offered by publishers. A lot of this can be solved by using a company that specializes in advertisement serving, media planning, and media buying.

Key Takeaways

  • Advertising can be paid for in a number of ways, including the following:

    • Cost per impression (CPI) or cost per mille (CPM)
    • Cost per click (CPC)
    • Cost per acquisition (CPA)
    • Flat rate
    • Cost per engagement
  • Emerging technology allows for an increased level of interaction within an advertisement and for advertising to be tailored to engagement media such as online videos and social network applications.


  1. Which pricing model do you think would be best suited for a branding campaign? Why? For a direct response campaign? Why?