Pricing models in digital advertizing Raquel Escandell Poveda By nature, the Internet allows for purchasing models that are highly adapted to results. Beyond the insertion of an advertisement for a certain time or space- for which coverage or estimated and impact recorded-, as in the case in most offline media, the Internet has a purchase option based on results. Investments are made knowing in advance exactly how much each user interaction with the ad will cost. Interactions refer to the click produced by a visit to the page the ad links to, or even what happens after that visit, such as user enrollment or a sale. This type of payment based model by desired results is called "performance marketing". The aim of performance marketing is usually to gain traffic, enrollment or sales; that is, highly quantifiable targets that go a step beyond pure branding or brand awareness. BUYING TIME OR FIXED SPACE If Internet were to adopt the purchasing model of offline print media, the method of purchase would be almost exclusively fixed space, that is, paying for a given space for a specified amount of time. It is also common to sponsor a section or specific content, in which case the sponsorship contract is established for a specified time. In this type of purchasing it is important to have available data about the views or unique users to the site, in order to make comparisons with other media and establish the cost per visit or cost per unique user. Although we must remember that different sources provide different measurement data, so you must ensure the validity of the data and source. In some publishers, the option of cost for time is offered in addition to the usual rates of cost per impression, as a possibility for advertisers to stand out for a given day or week, gathering all the prints of a specific page or section, after having bought all the advertising space available. This is called Brand Day or Brand Week, and the goal is visibility, and therefore is used primarily for a branding campaign. During the stipulated time, all the banners that a page has, in the header, side or inserted within the content itself will be for the exclusive use of that campaign and therefore the prominence of the brand is complete. COST PER MILE (CPM) 1 The most common purchase method of online advertising is cost by mile (CPM), that is, the number of times an ad is displayed. Normally the rates are set based on one thousand impressions CPM (cost per mille or cost per one thousand impressions). If CPM = 30 €, 30€ will be paid every thousand times the ad is displayed. This purchase model ensures that the ad will display the exact number of times for which it is paid, that is, ensures a certain impact that in the offline print media can only be known thanks to audience studies. This does not mean that the ad will be visualized by a determined number of different users, as a single user can enter a page multiple times; therefore, being affected repeatedly by the announcement. Many publishers offer the possibility of segmenting the prints by geographic IP, that is, where the user is located, so that we can refine our campaign: continuing the example, if the ad was segmented to a Madrid IP, the ad would appear the number of times purchased only on a browser located in the region of Madrid. We can also segment by, limiting the number of times a user sees the same ad. COST PER CLICK (CPC) The method of payment CPC, cost per click, states that the advertiser pays only when a user clicks on the ad and as a result visits the destination page. This form of purchase is part of the so-called performance marketing because it is paid only by the interaction performed by the user, in this case by the number of visits generated to the advertiser website through that ad or campaign. With this method, as in CPM, you cannot know in advance the number of different users that visit the target page as the same person can click more than once. The cost per click can be set in advance or, as is most common, the advertiser proposes the maximum price they are willing to pay per click and, depending on a number of parameters that depends on the vehicle or advertising network which is running the ad, a price is established for each click. Campaigns in the Google search engine, Google Adwords, work mainly with pay per click. Using the Google control panel, advertisers create ads and define key terms or words for which they want their ad to appear. For each keyword, they set the maximum price they are willing to pay, say 0.5 euros per click. Google establishes a system of ad quality based on various parameters such as CTR (proportion of clicks in relation to the number of impressions), quality of the keyword ... whereby the order in which the ads appear is set in search results for the same keyword. It is a bidding system whereby the advertiser that is willing to pay more and has a better quality ratio according to Google, appears in the first position and so on. COST PER LEAD (CPL) In the CPL (cost per lead) mode of payment the advertiser pays only for leads or conversions that users perform once they have entered the destination page through the advertisement. This lead or conversion is defined in advance and can be: - Subscribing to a newsletter, - enrollment on a page, - a request for information through a form - downloading a particular file, - registration for a contest, etc. The cost per lead means that the advertiser will not pay for the times their ad is displayed (impressions) or for the times their page is visited through the ad (clicks), but for the times a user, through the ad in that vehicle, executes the predetermined conversion. 2 This type of purchase is offered primarily through affiliate networks in which members, i.e., the publishers willing to place an ad only receive compensation if their visitors access the page in question and make a conversion. COST PER ACTION, CPA Cost per action or CPA is very similar to the CPL but, this time, the stipulated conversion is usually a direct purchase on an online shop or a transaction in which the user typically agree to a greater commitment with the advertiser. We could say it is a more specific type of CPL. In this case, if the advertiser has an online store and the defined conversion or action the user making a purchase or reservation on its online store, the vehicle on which the ad is published will only receive payment when this action is performed through the banner appearing on their page. Sometimes purchasing patterns are mixed in the same campaign. The advertiser starts buying impressions (CPM) and, depending on the results, then CPC or CPL is established. This is because, a priori, an ad network without history on a given product does not have enough data to accept CPL without knowing whether it will have the number of interesting leads for the campaign to be profitable. Based on: Escandell-Poveda, Raquel (2014), “Modelos de pricing y contratación de espacios”. En Papí- Gálvez, Natalia (coord.). Claves en la Planificación de la Publicidad Online: Fundamentos, Herramientas y Retos. Madrid: AIMC, pp. 110-227. 3 .