Pay Per Click, CPM, and Affiliate Advertising Models

I have a public speaking/business training site, and I'm ready to build traffic. But I'm bewildered by the different services. Which is better between the pay-per-click like GoTo.com and the pay-per-impression model like Google.com? -- David Cory http://www.davidcory.com Vancouver, British Columbia, Canada

There are three common models you'll find when you purchase advertising:

CPM (cost per thousand impressions) or Pay Per Impression advertising can be expensive if your ad doesn't motivate people to click on the banner or text link. Generally, ads in e-mail newsletters targeted to your audience (such as Doctor Ebiz, targeted to small business owners, marketing managers, etc.) tend to pull better than banner advertising, though you can now find untargeted banner ads for $5 to $10 CPM on various sites and ad networks.

CPC (cost per click) or Pay Per Click advertising has some real advantages for advertisers. You only pay when someone clicks on your banner ad (ValueClick.com) or on your paid and prioritized search engine listing (GoTo.com). While ValueClick requires a minimum $5,000 campaign, you can start with GoTo.com for only $25 and add dollars to your account as you find it successful. The GoTo.com model and others listed at http://payperclicksearchengines.com allow advertisers to bid for the top positions for a particular search word on a per-click basis. For example, on 1/23/01, the keywords "web marketing" cost $4.21 per click-through for the top spot, but position #5 was $1.67 per click-through. You must determine the conversion rate, that is, the percentage of visitors who you can expect to make a purchase on your website. Then you can calculate how much you can afford to pay in order to make a sale on your site, and you'll know the maximum amount you can afford to bid for your listing. The danger of pay-per-click models is that ads might be subject to fraud -- for example, a competitor clicking repeatedly on your listing. Ask the siteowner what protections are in place against fraud.

CPA (cost per action) or Pay Per Action advertising is another way of describing the typical affiliate program. Merchants pay several hundred dollars for the software or for a set-up fee with a service bureau such as Commission Junction. But then they only need pay when a sale is actually made. Commission Junction takes care of cutting checks to affiliates and manages the program for a small per-sale fee.

To find out what advertising approach works best for your business, you'll need to experiment. Each can be advantageous to you, but Pay Per Click programs like GoTo.com are clearly the least expensive to begin with.