It can be difficult getting your head around the payment models that advertising companies use, particularly when you start getting into online advertising.

For example, what do CPM, CPV, CPC, CPVM all mean? We’ll get to that later.

Advertising companies charge in different ways, ranging from reaching campaign goals, retainer fees or hourly rates.

Basically, you can pay for:

• the effort or time and knowledge to get an advertising campaign to be the best it can be
• efficiency, which is for the return on investment that the campaign achieves
• scalability, which is the integrated marketing growth strategy and ability of the campaign.

Digital advertising – payment models deciphered

Let’s look at the different ways that people can charge for the advertising campaigns.

• Hourly rates: This is for the total number of hours spent on your campaign. It can be predicted beforehand and you can work out a quotation agreement for this.
• Campaign specific metrics: This is measurable and based on KPIs such as awareness and impressions.
• Cost per transaction: Marketing dollars are tracked to sales dollars.
• Flat rate – deliverables: There is a scope of work, and you pay according to this scope being met. Anything outside of scope is additional.
• Flat fee based on spend and engagement: A fee based on size, scope and complexity of the project. What has the spending been for advertising in paid media? What has been the engagement?
• Revenue generated: What revenue is expected to be created, or has been created through the advertising campaign? Not all campaigns are successful. Sometimes a bonus might be added if an increase in revenue is directly related to an advertising campaign.
• Cost for campaign goals: What are the costs for a landing page, paid content, coding, getting leads, etc?
• Per skills set: What are the skills that are needed on your campaign? How much does it cost to have those skills added to your project?

As well as the payment methods, if you’re using online services or online advertising, there will be some acronyms to get your head around:

• CPC: Cost per click.
• CPM: Cost per 1000 impressions.
• CPE: Cost per engagement.
• CPF: Cost per follower (usually social media)
• CPV: Cost per view: (usually internet video)
• CPI: Cost per app install (smartphones, ipads).
• CPVM: Cost per viewable impression.

You can find a discussion about the best models here.

Debby Jones, Digital Marketing Advisor for the Brand Agency, says there are lots of payments models, with some more transparent than others.

“This may be one consideration but choosing the right payment model for your business will usually be decided by what is the best fit for your business model,” she says.

“Some companies measure success by brand awareness, whereas others are seeking to convert sales. So, whichever payment model a client chooses it is essential to understand how the costs have been determined.

“For example, if there is a percentage markup on the click or impression budget, then that percentage should be clear and transparent to the client so that they can see how much is being paid to third-party providers such as Google.”