What Do All Those Ps Mean, Anyway?
Every industry has a vocabulary that is unique to itself – words and acronyms that have little relevance outside of that particular industry. The world of internet marketing is no exception. In the internet marketing business you will often see and hear terms being bandied about such as PPC, CPM, PPA and others. So just what do these terms refer to and exactly what do all those P’s mean?
For savvy internet marketers who have been around the block a few times, these terms are second nature. For the novice, however, it can all be rather confusing, to say the least. The information you find here will, hopefully, help you unravel it all and gain a better understanding of some of the industry jargon.
Much of the revenue that is derived from internet marketing activities is driven by advertising programs. In most cases, the acronyms you encounter have to do with the various types of advertising campaigns that are employed. To begin wrapping your mind around it all, you need to understand some of the basics.
We will start with who the players are. Generally speaking, there are advertisers and publishers. An advertiser is a company or organization that pays to have their advertisements displayed on the web. Advertisers are also referred to as merchants. Publishers are those who own web properties, such as a website, and who display the merchant’s advertisement on their site.
To get a clearer understanding of this, assume that you own a website that provides information about bowling. Now, also assume that there is a company that makes bowling balls. The company would like to place advertisements on websites such as yours in order to have their name and products put in the path of people who are looking for information relative to bowling, because those people would be good potential customers. This is what you will hear referred to as “targeted traffic.”
In this case, the bowling ball company is the advertiser or merchant. You, as the site owner, will have the company’s ads showing up on the pages of your site. You are the publisher, as you are “publishing” the ads for your visitors to view.
Now that we have defined the relationship between advertisers and publishers, let’s take a look at all those letters. When a merchant decides to run an advertising campaign, they must determine the type of payment scheme they will utilize. The various acronyms you encounter basically refer to the means by which the advertiser has chosen to purchase the ads.
The term PPC stands for Pay Per Click while CPC means Cost Per Click. Both of these terms refer to exactly the same thing – the amount of money that is paid when an end-user, your visitor, clicks on the merchant’s advertisement. The advertiser has agreed to pay a certain amount for each incidence of someone clicking on one of their ads. This is what the merchant is “paying per click” or what it is “costing per click” for their ad campaign.
The way PPC/CPC works is quite simple. As the publisher, if the ad is showing on your site and is clicked on, you get a percentage of the amount the merchant is paying for that click. PPC programs are administered through third party agents such as Google Adsense and Kontera Advertising.
PPA and CPA stand for “Pay Per Action” and “Cost Per Action”, respectively. Again, as with PPC and CPC, the terms refer to the same thing.
The concept is based upon the idea of payment for a particular action being taken by an end-user. The action will vary according to the merchant and campaign. For example, an advertiser may have a contact form they wish to have filled out and submitted to them in order to develop a database of prospects. In such a scenario, a visitor to your site who clicks on the advertiser’s link, fills out the form, and submits the information to the merchant would be fulfilling the “action.”
The advertiser would then pay the predetermined amount and you, as the publisher, would receive a portion of the payment. PPA/CPA programs are usually managed by third party groups such as Commission Junction and LinkShare, among others.
The term CPM indicates “Cost Per Thousand” and is relative to advertisers only. As a website owner, you will generally not have to be concerned with this part of internet marketing unless you are directly selling advertising on your site.
When an ad shows up in search results or on a web page, it is referred to as an impression. In short, CPM is the amount an advertiser agrees to pay for 1000 impressions of their ad. When you perform a search on Google, for instance, you will usually see some advertisements on the right side of the page that have some relevance to what you have searched for. These ads are (usually) of the CPA variety. The advertiser is paying Google a contracted amount for showing the ad, regardless of whether it is clicked on or not.
Depending on the nature of your site, it is possible to negotiate CPA deals with advertisers directly. However, it is not something that is frequently done, except for extremely large and well known sites such as Amazon or Ebay.
PPC, PPA, and CPM are vital components of internet advertising. Certainly there are other terms and acronyms that you will encounter, as well. Hopefully, this gives you a basic understanding of some of the advertising concepts that make the world of internet marketing go around.