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Glossary – CPO (cost per order)

CPO (cost per order)

Nikiforov Alexander
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Overview of the CPO Model

CPO (Cost Per Order) is a popular payment model in the field of online advertising, where advertisers pay only for users who make a purchase. This model is also known as CPS (Cost Per Sale) and is a specialized variant of the more general CPA (Cost Per Action) model, where the advertiser pays for specific target actions performed by attracted users.

The main task of CPO is not only to pay for completed sales but also to use this metric to evaluate the effectiveness of advertising campaigns. The formula for calculating CPO is as follows:

CPO = total advertising expenses / total number of sales

For example, if the total budget for contextual advertising was 27,000 rubles, and the campaign resulted in 108 sales, the calculation would be as follows:

CPO = 27,000 / 108 = 250 rubles

This means that the average cost of acquiring a customer through contextual advertising was 250 rubles. It is important to note that the exact values of a good CPO can vary depending on the niche, product price, total advertising costs, and level of competition.

How the CPO Model Works

The CPO model is most commonly implemented through banner networks, although it can also be applied to other formats of ad blocks. The working process is as follows:

  1. The advertisement is placed on an external resource, which may include not only websites but also social networks, blogs, and email newsletters.
  2. The advertiser installs tracking code on their website to monitor purchases made by users who came through the ad.
  3. When a visitor clicks on the ad, goes to the advertiser's website, and makes a purchase, the site owner receives a pre-agreed percentage of the deal or a fixed amount.

In most cases, the CPO model is used when launching advertising through affiliate networks, where the advertiser registers in a CPA network, posts offers, and sets a payment percentage rate. Webmasters who agree to work under these conditions place ads on their resources.

Advantages of the CPO Model

Among the key advantages of the CPO model, the following can be highlighted:

  • Cost-effective payment model: Advertisers pay only for those users who actually made a purchase.
  • No financial risks: Compared to contextual advertising or SEO, CPO reduces the likelihood of unnecessary budget expenditures.
  • Visible results: Thanks to the number of sales, the effectiveness of the advertising campaign can be assessed quickly and accurately.

The main advantage of the CPO model is that it eliminates the drawbacks of affiliate programs that operate on a pay-per-view or pay-per-click basis. The advertiser pays only for actual sales, which excludes inflated views or "click fraud" on the budget.

Who the CPO Model Advertising is Suitable For

Payment under the CPO model is most effective in niches with a short sales cycle, such as fast-moving consumer goods. This scheme is most often used for:

  • Online stores and e-commerce sites: A high demand for the product is a key requirement.
  • Online services: Travel companies, real estate agencies, and educational organizations.
  • Digital products: Applications, software, and e-books.
  • Financial organizations: Services and products that can be obtained online.

However, this model may not be suitable for selling complex and specialized products that require long customer interactions, as well as for the B2B segment, where the purchasing process involves careful study of the offer and negotiations. It is important for the company to have the capability to quickly increase production or procurement volumes, as launching advertising can lead to a sharp increase in demand.