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Internet advertising, also called online or web advertising, is a common way of delivering messages to potential or existing customers. Websites, online advertising companies, and major search engines such as Google set web advertising costs using a variety of models. Types of web advertising costs can be grouped into two main categories: some charge based on advertising exposure while others only charge when an advertisement directly leads to interaction between a potential customer and the advertiser.
Exposure-based web advertising costs include cost per thousand, cost per visitor, cost per view, and cost per click. Cost per thousand, sometimes called cost per mile, refers to charging an advertiser a fee every thousand times an advertisement loads. Cost per view, on the other hand, is when the advertiser is charged every time an advertisement is displayed to a viewer, and cost per visitor is when the advertiser pays each time an Internet surfer is led to their site through an advertisement. Cost per click, also called pay per click, requires payment whenever an advertisement is clicked. Clicking on an advertisement commonly directs a potential customer to a company's site or provides further information about its products or services.
Web advertising costs can also be organized more in relation to direct results. More so in its infancy but still today, some managers are suspicious of the efficacy of online advertising. Paying for results offers such managers a more concrete correlation between web advertising costs and benefits. This kind of web advertising has also become quite common in affiliate programs, wherein companies whose operations are related are encouraged to make referrals.
Models in this category include cost per lead, cost per order, and cost per engagement. In business, leads are the establishment of any contacts that might eventually lead to gains. An order is what someone places, usually by filling out a form, when they want to pay for a product or service. Finally, an engagement refers to any activity that shows potential customers are interacting with the advertisement; for example, playing a game within it or answering a question it poses.
All of these models can be seen as related to cost per action. Cost per action is when advertising costs are charged in correspondence with the number of times potential clients take a desired action. These actions might include a purchase, a registration, the answering of a questionnaire, or any other type of interaction the advertiser views as beneficial.