Comparing CPC vs CPA Cost Models

Over the past four years, we have had the pleasure of working with a broad range of advertisers. While the size, budget and campaign objectives vary between brands, there are a few common questions that all advertisers need to answer. One of the more prevalent being, which cost model should we use?

This question deserves serious thought, as there are pros and cons to the various cost models. Making the right choice requires a full understanding of the implications of each model, as well as a firm understanding of your goals and capabilities.

There are three major types of cost models for metasearch campaigns:

  1. CPC – cost-per-click
  2. CPA – cost-per action, where publishers charge a flat fee or % of booking value
  3. Hybrid – which is a combination of the two

These cost models can individually become more complicated. In Google Hotel Ads, advertisers can adjust CPCs based on many different factors such as the room rate, the placement of the ad within the search results, the length of the stay, the location of the user, and the type of device a user is using. TripAdvisor CPCs can be modified based on the placement and user audience. The remaining publishers vary in their approach, but most allow bidding by placement and device type.

For the purpose of this post, we will focus on the first two options, as the third is a merely a mixture of the first two.

CPC (Cost-per-click)

A CPC model applies to any auction environment where the advertiser pays a negotiated price for each click. Depending on the publisher, the CPC can be either flat or variable. Typically speaking, CPCs, also referred to as bids, can frequently be updated. Depending on the publisher, updates can be made in real-time or on a daily basis.

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