What is Cost Per Action (CPA)?
Quick Definition: Cost Per Action (CPA) is a performance-based advertising pricing model where advertisers pay a fee only when a user performs a specific, pre-defined action as a result of an ad. These actions can include a sale, a form submission, a registration, or an app install.
An Introduction to CPA
Cost Per Action (CPA) is one of the safest and most desirable pricing models for advertisers. Instead of paying for views (CPM) or clicks (CPC), the advertiser only pays when a specific, valuable business outcome occurs. This model directly connects advertising spend to tangible results, making it a powerful tool for calculating Return on Ad Spend (ROAS).
The “action” is the key component and is defined by the advertiser at the start of the campaign. It represents the conversion event they are trying to achieve. Because of its focus on results, CPA is a foundational concept in performance marketing, affiliate marketing, and mobile app advertising. Many other specific cost models are, in fact, specialized types of CPA.
How Cost Per Action Works: An Example
Imagine an e-commerce brand wants to drive sales of its new running shoes.
- Define the Action: The brand defines the “action” as a completed purchase.
- Set the CPA Rate: They decide they are willing to pay a publisher or affiliate $10 for every sale that originates from their ad. This is their $10 CPA.
- Launch the Campaign: They provide their ads to publishers. An ad is shown to a user, who clicks it.
- Track the Conversion: The user lands on the brand’s website and buys the shoes.
- Trigger Payout: An Offer Server, like Gokart or a similar tracking platform, attributes the sale back to the original ad click and triggers the $10 payout to the publisher.
The advertiser is happy because they only paid after making a sale. The publisher is happy because they were rewarded for driving valuable traffic.
Why is Cost Per Action Important?
- Low Risk for Advertisers: It shifts the risk to the publisher, as the advertiser does not pay for traffic that doesn’t convert.
- High-Quality Traffic: Publishers are motivated to send only high-intent users who are likely to perform the desired action, leading to better traffic quality.
- Clear ROAS Calculation: It makes it simple to measure if a campaign is profitable. If the profit from a sale is greater than the CPA, the campaign is successful.
Related Terms
- Cost Per Install (CPI): A specific type of CPA where the desired action is the installation of a mobile app.
- Cost Per Lead (CPL): A type of CPA where the action is the generation of a sales lead, such as a form submission or newsletter signup.
- Cost Per Engagement (CPE): A model where the action is a specific user engagement within an app or ad unit.
- Multi-Event Offer: Advanced campaigns that often string together multiple CPA events into a single offer.
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