What is IAB?
Interactive Advertising Bureau (IAB) is an organization established in 1996, headquartered in New York, USA. IAB legally supports Internet advertising companies, conducts research every year and sets up standards for Internet advertising businesses.
Business can afford Internet marketing by adopting payment methods. The most common payment methods are Cost-Per-Mille (CPM), Cost-Per-Action (CPA) or Pay-Per-Performance (PPF) and Cost-Per-Click (CPC). It is the advertiser’s choice to choose one that best suits their specific business.
- Cost-Per-Mille (CPM): Advertisers need to pay the publishers for every 1000 ad impressions.
- Cost-Per-Action (CPA) or Pay-Per-Performance (PPF): Advertisers pay the publisher for every visitor that visited the website and performed some action like registering or purchasing on the advertiser’s website.
- Cost-Per-Click (CPC): Advertisers pay the publisher for every visitor who visited the website through the link posted on the hosting website.
IAB Report on pricing models
According to the IAB survey report, the total revenues of Internet advertising on different pricing models are as follows.
- 2009: Total revenue collected in 2009 was $22.7 billion of which, CPA contributed a major share of 59%, CPM contributes 37%, and the share of other pricing models was 4%.
- 2010: Total revenue was $26 billion of which, CPA contributed 62%, CPM’s share was 33% and others’ was 5%.
- 2011: Total revenue was $31.7 billion of which CPA’s contribution was 64%, CPM’s was 32% and others’ was 4%.
- 2012 (Jan – June): Total revenue for six months was $17 billion of which, CPA’s share was 67%, CPM’s share was 31% and others’ was 2%.
- From these figures, it is clear that the percentage of advertisers opting for Cost-Per-Action (CPA) pricing model has increased every year. It was 41% in 2004 and has increased to 67% in 2012.
- The percentage of Cost-Per-Mille (CPM) advertisers is decreased over these years. It was 42% in 2004 and decreased to 31% in 2012.
- In other pricing models like Cost-Per-Visitor (CPV), Cost-Per-Click (CPC) and fixed payment methods the share was high during the initial stages, but has decreased drastically from 17% in 2004 to 2% in 2012.
- The above figures indicate that the advertisers are inclined to Cost-Per-Action (CPA) pricing model. This shows advertising via CPA helps companies do business. They are not willing to pay for the advertisements like Cost-Per-Click (CPC), Cost-Per-Mille (CPM) or fixed payment methods, where the advertisement does not bring any leads or sales.
These numbers show that online advertising getting popular rapidly and businesses are willing to pay for Cost-Per-Action (CPA) method, which means, paying only if the promotion has worked well for the business in getting leads or sales.