Posted by Fox on July 30, 2007 at 2:53 PM

Johnder Perez over at webhostb2b.com explains what CPA (Cost Per Action) means.

WHAT IS CPA?

CPA stands for cost-per-action. CPA essentially measures actions that are taken by the web site visitor that result in a purchase or an equivalent action such as signing up for a newsletter. An online marketer is relieved of some risk and is giving their advertisement investment a better value as this model places a lot of the responsibility of conversion to the publisher of the web site. Think of it in terms of earning commission. The goal of the online marketer is to compose a creative campaign that is capable of generating actionable leads and pays for each lead which results in some action being taken.

Let us clearly illustrate this concept further. Say, for example, you are browsing on a web site and your attention is caught by a creative advertisement for an amazing software application that you are enticed to purchase. You click on it, finding out that a free demo is offered. On the other end of this process, the software company has empowered the web site you visited to manage this CPA campaign, and has agreed to pay the publisher each time a visitor signs up and downloads a demo. This is how cost per action works.

Internet publishers must be able to allocate the cost and risk involved in CPA campaigns in order to maximize the turnover of their advertisement inventory. Consider the following formula:

Where X = number of impressions to be sold, Figure X/1000 * CPM = Z (pricing benchmark), X * 1.5% = Y (expected click yield), Z/Y = target cost per click

Source: webhostb2b.com

More Jargon Busting:
What is RON? (Run of Network)
What is PPS? (Pay Per Sale)
What is CPL? (Cost Per Lead)
What is PPC? (Pay Per Click)
What is CPS? (Cost Per Sale)
What is CPC? (Cost Per Click)
What is CPA? (Cost Per Action)
What is CTR? (Click Through Rate)