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. This model is by far the most common compensation model (81%) ^[1] used by online retailers that have an affiliate program. This form of compensation is also referred to as Revenue sharing.

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

Cost-per-action or Cost-per-acquisition (CPA), Cost-per-Lead (CPL). Advertiser (Merchant) pays publisher (Affiliate) $x.xx in commission for every visitor that was 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. CPA is the second most used compensation model (19%) after CPS (81%). ^[1]

Special CPA Compensation Models

Pay-per-call (no abbreviation exists yet)

This is a new compensation model. No official abbreviation exist yet. 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 $x.xx commission (CPA) 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". Click-to-call, along with call tracking, is a 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. ^{[citation needed]}

Pay-per-install (PPI)

Pay Per Install. Advertiser pays publisher $x.xx in commission for every install which was made by user who downloaded usually free application to which was bundled special code containing "Adware" application. 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 like Zango and Pay-per-Install of softahead.com ^[2] 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^[3].

Pricing Models in Search Engine Marketing

Pay-per-click (PPC)

Cost-per-click (CPC). Advertiser pays publisher $x.xx amount of money, every time a visitor (potential prospect) 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. ^[4]

Pricing Modes in Display Advertising

Pay-per-impression (PPI)

Cost-per-mil (mil/mille/M = latin/Roman numeral for thousand) impressions. Publisher gets from Advertiser $x.xx amount of money for every 1000 impressions (page views/displays) of the Ad. The Ad can be text (AdSense), banner image or rich media.

Pay per Action (PPA) or Cost per Action (CPA)

Cost-per-action (CPA). Used by display advertising as pricing mode since as early as early as 1998 ^[5]. By the end of 2006 did the share of the CPA/Performance pricing mode (47%) catch up with the CPM pricing mode (48%)^[6] and will become the dominant pricing mode for display advertising, if the trend of the last 9 years will continue in 2007 ^[7].

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^[8]. 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.