Compensation methods

Compensation methods (Remuneration), Pricing models and business models used for the different types of internet marketing, including affiliate marketing, contextual advertising, search engine marketing (including vertical comparison shopping search engines and local search engines) and display advertising.

Predominant compensation methods in affiliate marketing

The following models are also referred to as performance based pricing/compensation model, because they only pay if a visitor performs an action that is desired by the advertisers or completes a purchase. Advertisers and publishers share the risk of a visitor that does not convert.

Pay-per-sale (PPS) - (revenue share)

Cost-per-sale (CPS). Advertiser pays the publisher a percentage of the order amount (sale) that was created by a customer who was referred by the publisher. revenue sharing.

Pay-per-lead (PPL)/pay-per-action (PPA)

Cost-per-action or cost-per-acquisition (CPA), cost per lead (CPL). Advertiser pays publisher a commission for every visitor referred by the publisher to the advertiser (web site) and performs a desired action, such as filling out a form, creating an account or signing up for a newsletter. This compensation model is very popular with online services from internet service providers, cell phone providers, banks (loans, mortgages, credit cards) and subscription services.

Special CPA compensation models

Pay-per-call

Similar to pay per click, pay per call is a business model for ad listings in search engines and directories that allows publishers to charge local advertisers on a per-call basis for each lead (call) they generate (CPA). Advertiser pays publisher a commission for phone calls received from potential prospects as response to a specific publisher ad.

The term "pay per call" is sometimes confused with click-to-call, the technology that enables the "pay-per-call" business model. Call-tracking technology allows to create a bridge between online and offline advertising. Click-to-call is a service which lets users click a button or link and immediately speak with a customer service representative. The call can either be carried over VoIP, or the customer may request an immediate call back by entering their phone number. One significant benefit to click-to-call providers is that it allows companies to monitor when online visitors change from the website to a phone sales channel.

Pay-per-call is not just restricted to local advertisers. Many of the pay-per-call search engines allows advertisers with a national presence to create ads with local telephone numbers. Pay-per-call advertising is still new and in its infancy, but according to the Kelsey Group, the pay-per-phone-call market is expected to reach US$3.7 billion by 2010.

Pay-per-install (PPI)

Advertiser pays publisher a commission for every install by a user of usually free applications bundled with adware applications. Users are prompted first if they really want to download and install this software. Pay per install is included in the definition for pay per action (like cost-per-acquisition), but its relationship to how adware is distributed made the use of this term versus pay per action more popular to distinguish it from other CPA offers that pay for software downloads. The term pay per install is being used beyond the download of adware.^[1]

Some botnets are known to operate PPI scams to generate money for their operators. Essentially, the compromised computer with the bot agent is instructed to install the software package from a registered PPI source via the bot's command and control system. The bot operator then receives payment from the PPI agency and, after a short period of time, uninstalls the software package and installs a new one.^[2]

Pricing models in search engine marketing

Pay-per-click (PPC)

Cost-per-click (CPC). Advertiser pays publisher a commission every time a visitor clicks on the advertiser's ad. It is irrelevant (for the compensation) how often an ad is displayed. commission is only due when the ad is clicked. See also click fraud.

Pay per action (PPA)

Cost-per-action (CPA). Search engines started to experiment with this compensation method in spring 2007.

Pricing models in display advertising

Pay-per-impression (PPI)

Cost-per-mil (mil/mille/M = Latin/Roman numeral for thousand) impressions. Publisher earns a commission for every 1,000 impressions (page views/displays) of text, banner image or rich media ads.

Pay per action (PPA) or cost per action (CPA)

Cost-per-action (CPA). Used by display advertising as pricing mode as early as 1998.^[3] By mid-2007 the CPA/Performance pricing mode (50%) superseded the CPM pricing mode (45%) and became the dominant pricing mode for display advertising.^[4]

Shared CPM

Shared Cost-per-mil (CPM) is a pricing model in which two or more advertisers share the same ad space for the duration of a single impression (or page view) in order to save CPM costs. Publishers offering a shared CPM pricing model generally offer a discount to compensate for the reduced exposure received by the advertisers that opt to share online ad space in this way. Inspired by the rotating billboards of outdoor advertising, the shared CPM pricing model can be implemented with either refresh scripts (client-side JavaScript) or specialized rich media ad units. Publishers that opt to offer a shared CPM pricing model with their existing ad management platforms must employ additional tracking methods to ensure accurate impression counting and separate click-through tracking for each advertiser that opts to share a particular ad space with one or more other advertisers.

Compensation methods in contextual advertising

Pay-per-click (PPC)

See PPC/CPC in Search engine marketing.

Pay-per-impression (PPI)

see PPI/CPM in Display Advertising

Google AdSense offers this compensation method for its "Advertise on this site" feature that allows advertisers to target specific publisher sites within the Google content network.

Compensation methods grid

There are different names used for the same type of compensation method and some compensation methods are actually special cases for another method. This grid shows alternative names for the individual compensation methods. The "cost per ..." name was used as default.

References