What is CPA in Online Advertising

When we are going to implement our online advertising strategy there are several ways to establish the form of payment for the actions to be carried out. This will be set according to the most convenient for us having formulas related to the number of impressions, price per click or the method of this blog, paying based on the cost to achieve a goal, the CPA.

What is CPA or Cost per Acquisition?

The CPA is the payment method by which an advertiser will pay for the actions it performs each time it achieves a conversion. Therefore, first we will have to establish which conversion we are interested in, either a form submission or a sale for example, so that every time it is achieved, the payment is made.

This means that if our ad has achieved traffic to our website but has not converted the payment will not be carried out by the advertiser.

How the Cost per Acquisition is Calculated

The CPA is a metric that must be introduced in the platform before launching the advertising campaigns and must be calculated according to the real objectives to be achieved with advertising. The CPA will be based on the result obtained from the following formula.

CPA (Cost per Acquisition) = Advertising investment / number of products sold

In this way we will obtain the cost in advertising that we have to make to obtain a conversion, in this case a sale.

We must also add that there are two ways to pay for the acquisition of our conversion set in the management platform that we are going to use, one of them is through a fixed cost that we propose and the other is through a variable cost of the total value of the conversion.

Benefits of using this payment model

• Security: You only pay if your ads achieve the objective previously set, otherwise no economic disbursement will be made.
• Profitability: the chances of achieving a positive ROI are higher since the expense is only carried out if a sale is made on the web. The relationship between advertisement and sale is high in this case, not contemplating other objectives such as visibility.
• Sales-focused format: the number of impressions of this type of ad is limited compared to the use of other payment systems such as cost-per-click. Here the ad impression will be made if the chances of converting are high by the user who is browsing. Therefore it will not be a type of ad that is constantly impacting users.
• Format suitable for Ecommerce: this way of establishing the payment of the ads is suitable for online stores having product catalogs to advertise without the budget skyrocketing as it could happen with a cost per impression.

Disadvantages of using CPA as a payment model

• Extensive account history: in the case of using CPA on the Google Ads platform, accounts with a good history and that achieve a minimum number of conversions per month will be needed for the tool to detect which users can potentially convert and show them the advertising.
• Advertising spaces: with this payment method, if we give a space to a company that we suspect is not going to convert anything or little, the result or benefit we get for it will be scarce.
• Branding: In branding campaigns where we are going to talk about the brand we are not looking for conversions, we need it to be displayed in large quantities so it would be counterproductive to use this metric.

How to optimize your CPA in Google Ads

In this case the CPA will be influenced by other metrics related to the quality level of keywords, ads and landing page.

The higher this quality level is, the more we will be able to save a certain amount of cost each time there is an impression of an ad and the established conversion is achieved.

To perform these optimizations we will have to have well done our keyword Research, a structure of ad groups where the wording of it contains the relevant keywords and the optimization of the landing page both seo level and usability and responsive for mobile devices.

Having these quality metrics well optimized will allow us to expand the size of our campaign to other products in our ecommerce catalog in the long term.

Alternative paid form metrics

Cost per thousand impressions (CPM)

This metric reflects the cost associated with a thousand impressions made of our ad.

With this type of metric, who gives the advertising space, has a better forecast of receiving an economic amount for the assignment of that space. It depends on the number of users that browse that website, so it is a good method for websites or blogs with a lot of traffic, for example

This type of payment is ideal to publicize a brand, a new range of products or in general what we want to reach the maximum number of people that our budget allows us.

Cost per click (CPC)

In this method of charging the advertiser is billed according to the number of people who access the web by clicking on the ad.

The CPC will help us to meet conversion goals and will contribute in part to the Branding section since the number of ad impressions can be very large depending on the budget.

Conclusions

Depending on our chosen advertising strategy and the objectives we pursue, the CPA can be a beneficial form of payment.
In sectors with a lot of traffic and for online stores, CPA will help us to achieve sales without making large outlays of money and always looking for a positive return on investment. On the
other hand, if what we are looking for is to communicate or publicize certain commercial information, it is best to use another payment method that makes us more visible.

Related Posts