Facebook is rolling out Cost Per Action (CPA) bidding through its Ads API, the first time it has departed from CPM- and CPC-based ad pricing. The move is yet another attempt by Facebook to capture the performance marketing spend (see also: FBX retargeting, offline data matching, App Install ads) that continues to be the main driver of growth in digital advertising.
Until now, Facebook advertisers could only run campaigns on a CPM or CPC basis. CPA delivers more predictability of ad spend by setting a price cap for certain types of desirable actions. Facebook will then optimize ad placements to deliver ads to users it believes are likely to convert on those actions.
With today's global launch, bidding is restricted to three action types: Likes, Offer Claims and Link Clicks. But Facebook says it will eventually add all actions possible on its platform, including app installs, video views, comments, shares and so on.
Readers may wonder what distinguishes a CPA for "link clicks" from a CPC buy. Facebook argues the difference lies in its existing definition of CPC, which is a click anywhere within an ad. That could include a click to a Facebook page, to an external site, or to a separate action such as "comment" or "share." With CPA bidding for "link clicks," advertisers can pay only for traffic to a specific external landing page.
Even so, the pricing model is likely to be embraced by advertisers in the financial, education, home services and health/beauty verticals that apply a high degree of ad pricing optimization linked to specific online actions.
"It's a clever move," says Hakan Lindskog, CEO of performance marketer MediaWhiz. "Advertisers like CPA since it's accountable. CPA-based pricing has been increasing share of market for a long time."
Performance marketing spend is still growing faster than brand advertising, as the Interactive Advertising Bureau noted yesterday in its 2012 full-year online ad spending report. Online ads transacted through impression-based models rose to 32% of revenues, up from 31.3% in 2011. Meanwhile, performance-based pricing accounted for 65.9% of revenues, up from 64.6% in 2011.