Advantage and Disadvantage of CPO/CPL metric model
CPO = Cost Per Order
With the CPO, the publisher will only be reimbursed if he delivers a purchase (= order) for the advertiser. So the classic affiliate program, Amazon and Co. working with the years. Also, tour operators and insurance companies are typical Advertisers for this advertising model.But this model has become quite common now as advertiser has become smart and belives in paying only for the sale that he gets.
CPL = Cost Per Lead
The lead is compared to buying a slightly attenuated variant in which it comes to registrations for newsletters or to download (partly free) PDFs or sign ups,etc.
Basically, CPO and CPL but have in common that the publisher is paid only if the user has performed an action after the actual click an the ad. In contrast to the CPC, the user needs to do more than just click on the ad here.
- Benefits of CPO / CPL for Advertiser :
- It is preferred model for the advertiser as zero risk on his side.
- The major benefit that advertisers have is that they can exactly calculate how much to pay per defined action. So if an advertiser know that a new customer in the section means $50 which is the profit of $10, they can calculate and easily pay equally high CPC / CPL. The cost per lead is generally calculated by percentage of profit which varies from 2 to 10 % but providers like Amazon have a percentage of revenue share as CPO / CPL, sometimes combined with an absolute maximum limits, for example: From a value of $250 upwards the publisher receives an overall 10 €, no matter whether the transaction is $250 or $250,000.
- The banner will be shown for unlimited period of time as no connection with clicks and impressions
- Low risk of frauds.
- Disadvantages of the CPO / CPL for advertisers:
- Not much or any major disadvantage but yes if suddenly the calculated revenue per user decreases sharply because of added other buyers or leads to a different season, then also the CPO / CPL model can have a negative impact. Therefore, one should have the daily average shopping carts and the return rate in the eye and adjust the CPO / CPL Progress!
- One another disadvantage could be that it is difficult to find publishers who want to switch CPO / CPL campaigns.
- Benefits of CPO / CPL for Publisher:
- Even if the banners are clicked rare, the remuneration can compensate with very high CPO / CPL which again and lead to a good revenue ratio per page impression.
- Cost per lead or order is much higher than CPM or CPC
- Disadvantages of the CPO / CPL for Publishers:
- Dependable on conversion tracking technology and measurement, any miss on that can lead to miss of a conversion so can be a loss for publisher
- The cookie problem which is quite major i.e. “last cookie wins”.
- Hard for the publisher to estimate when to stop a campaign
- Summary of CPM, CPC, CPL and CPO:
A comparison of the models, one can say that each has certain advantages and disadvantages for publishers and advertisers. Each must for himself and his campaign will find the right model and also a partner who plays it. Otherwise, the whole theory is pure waste. The CPM is an extreme on one side, CPO / CPL are the extremes on the other side. The CPC model is somewhere between these two extremes and therefore enjoys such great popularity well.