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What are the Different Types of Online Advertising?

By James Withers
Updated May 16, 2024
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Four fundamental types of online advertising are cost per click (CPC), cost per impression (CPM), cost per action (CPA), and cost per lead (CPL). While advertisers employ a variety of tactics to attract the attention of potential consumers, they must purchase advertising space operating on one of these four types of campaigns. Whether presented in a pop-up format, a banner ad format, or as floating ads, advertisements will urge site visitors to make a purchase via one of these strategies.

The cost per click (CPC) model invites users to express interest in a product or service by clicking on an ad for more information. When purchasing a CPC ad, an advertiser may agree to prices using either a flat-rate or a bid-based purchasing scheme. With a flat rate scheme, the purchaser and the seller of an online ad agree to a predetermined cost per each click on the ad. With a bid-based plan, prices are sold in a private auction with bids being placed by competing purchasers. A drawback to the CPC advertising model is that it can be compromised by click fraud.

Cost per impression (CPM) advertising campaigns operate on the assumption that a higher volume of traffic for an ad is likely to generate a higher volume of sales. The cost for each impression is generally fixed at a fraction of a cent. Depending on the value of the traffic, however, a purchaser may fix the cost for each impression at a higher rate.

Cost per action (CPA) ads cost money to a purchaser only if a viewer of the ad completes a required action on the basis of the ad. For example, some ads encourage a viewer to complete a registration form, while others specify that viewers must exchange credit card information for a service or product. Online advertising via a CPA campaign allows purchasers to inexpensively test advertising strategies before committing to a more expensive campaign. Additionally, this type of campaign gives a purchaser a means to develop visibility in the advertising sector.

Cost per lead (CPL) ads only cost a purchaser money if a qualified lead is generated on the basis of the ad. Such ads are often used to promote high-end services, such as investment accounts or real estate purchases. Leads are qualified on a range of factors, including age, financial standing, or medical history. Advertisers hoping to initiate contact with a customer, such as health insurance companies, frequently use CPL ads.

One of the primary benefits of each of these four types of advertising methods is that they permit advertisers to reach an online audience at a scalable cost.

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Discussion Comments
By clintflint — On Sep 14, 2012

@Belted - Personally, I think that social media as a marketing tool has too much hype. People don't use social media to be sold things, they do it to interact with their friends.

So, the only way to use it effectively is to be a friend. Don't just send out advertising, give them real value and interaction. Competitions can help as well, I think. Just think about what you like to do when you're on your own Facebook page and which companies you like to keep track of and why, and go from there.

I would also be really interested to hear from successful social media advertisers since I think, despite the hype about this form of free online advertising, they are actually few and far between.

By bythewell — On Sep 13, 2012

@chivebasil - There are definitely a lot of advertising agencies that specialize in dealing with online advertising, but I would be very cautious about using one. It's a difficult thing to track and the only real way to know if online advertising services are genuine is to research their customers and see if they are satisfied.

If you are considering signing up with a company, ask to be put in contact with some of their customers first, so you can see first hand what they do. It's all too easy for anyone to start this kind of company and they may not have the expertise you need.

By OeKc05 — On Aug 18, 2012

Some online advertising rates are really reasonable. I recently started running some cost per impression ads for my art shop, which is located within a larger art website that plays host to many other shops, and I only paid about $5 for a week of advertising.

Even though I didn't see any sales as a result, I was able to view my shop's statistics, and I saw that my page views had increased dramatically during the week that my ad ran. Three people had added my shop to their list of favorite shops, and that means that whoever visits their page can see a link to my page. So, the value of online advertising is often greater than the cost.

By Belted — On Aug 18, 2012

What are the best practices for social media marketing? I have been hearing so much about it lately but I really have no idea how to do it.

My store has a Facebook page and we Tweet and we have even made a few videos. But we do not have that many followers and I am not sure that our social media presence is having any effect at all. Has anyone had success with this kind of online advertising? What worked for you?

By chivebasil — On Aug 17, 2012

I am interested in getting my company to advertise more online but I know that we do not have the expertise in house to really maximize our efforts. Is there such a thing as an online advertising agency that specializes in Internet marketing? I think that going through an expert might be the best way to use our resources effectively.

By vigilant — On Aug 17, 2012

Email marketing is one of the most successful and cost effective ways to market online. It has all the advantages of direct mail with a fraction of the costs. Plus, emails can be multimedia packages that link directly to sales pages while direct mail ads can only direct you to a store that could be miles away.

The most important thing to remember is that there are laws against sending out spam. It is both illegal and unethical for companies to send their marketing messages to people that have not explicitly asked for them. So if you are going to send out sales emails, make sure that all the recipients have opted in.

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