What Is CPA And How Is It Used In Online Advertising
The CPA is one of the metrics that allows companies to optimize their investments in online advertising. However, it may not be the right metric for all types of ad campaigns. For this reason, we analyze what the CPA is and when it is convenient to take it into account.
Table of Contents
What Is The CPA?
The CPA is a metric applied to online advertising that can be defined as the average amount that a company has had to pay to achieve a conversion through its ads. It comes from the acronym “cost per action” (cost per action), although it is also known as “cost per acquisition”. The “action” it refers to is usually closing purchase or submitting a form (in the case of sales leads ).
Ultimately, this metric considers the investment in online advertising that a company must make to achieve a customer or lead. Do not confuse CPA with CPC (“cost per click “): in the latter case, companies only measure the investment they must make to get a user to click on their ad, regardless of whether this user also ends up becoming a customer or lead.
How Is The CPA Used In Online Advertising
Taking the CPA into account is one of the bidding strategies in Google Ads. The company that uses it will achieve the highest number of conversions possible, respecting a maximum cost for those conversions, whether purchased, a phone call, a download or other transactions.
In this way, the algorithms and the machine learning capacity of Google Ads will try to achieve the maximum possible transactions following the marked CPA limit.
What Types Of Ads Does The CPA Apply To
The CPA bid strategy is ideal for small companies looking to increase their conversions and leads in a short period, such as start-ups. It is also common in lead generation strategies in B2B or B2C business models.
The most common types of campaigns to use a CPA strategy include those that use the following conversion models:
- Make a purchase or a subscription to a service.
- Obtain emails or other information for the database by offering exclusive content or discount in exchange.
- A survey in the case of companies seeking to obtain market intelligence.
- Sign up for a free trial period for software or get free samples.
Advantages for these businesses include cost optimization and risk minimization: companies only pay for online advertising if it brings them a substantial benefit. Thus, the investment in online advertising only grows as so do the transactions for the business.
On the other hand, the main disadvantage of this strategy is that Google Ads may impose certain limits, such as the need to demonstrate that the company has already had results in similar campaigns in the past.
How Is CPA Calculated
The CPA or cost per action is calculated by dividing the total cost of conversions by the number of complete modifications that have been carried out.
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