Pricing Models for Online Advertising: CPM vs. CPC

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dc.contributor.ISNI0000 0000 4526 9637 (Jacob, VS)
dc.contributor.LCNA94021959‏ (Jacob, VS)
dc.contributor.authorAsdemir, K.en_US
dc.contributor.authorKumar, Nandaen_US
dc.contributor.authorJacob, V. S. (Varghese S.)en_US
dc.date.accessioned2014-03-20T20:20:39Z
dc.date.available2014-03-20T20:20:39Z
dc.date.created2011-12-7en_US
dc.date.issued2012-09en_US
dc.description.abstractOnline advertising has transformed the advertising industry with its measurability and accountability. Online software and services supported by online advertising is becoming a reality as evidenced by the success of Google and its initiatives. Therefore, the choice of a pricing model for advertising becomes a critical issue for these firms. We present a formal model of pricing models in online advertising using the principal-agent framework to study the two most popular pricing models: input-based cost per thousand impressions (CPM) and performance-based cost per click-through (CPC). We identify four important factors that affect the preference of CPM to the CPC model, and vice versa. In particular, we highlight the interplay between uncertainty in the decision environment, value of advertising, cost of mistargeting advertisements, and alignment of incentives. These factors shed light on the preferred online-advertising pricing model for publishers and advertisers under different market conditions. © 2012 INFORMS.en_US
dc.identifier.bibliographicCitationAsdemir, K., N. Kumar, and V. S. Jacob. 2012. "Pricing models for online advertising: CPM vs. CPC." Information Systems Research 23(3): 804-822.en_US
dc.identifier.issn1047-7047en_US
dc.identifier.issue3en_US
dc.identifier.startpage804en_US
dc.identifier.urihttp://hdl.handle.net/10735.1/3195
dc.identifier.volume23en_US
dc.relation.urihttp://dx.doi.org/10.1287/isre.1110.0391en_US
dc.rights©2012 INFORMSen_US
dc.source.journalInformation Systems Researchen_US
dc.subjectAsymmetric informationen_US
dc.subjectCost per click (cpc)en_US
dc.subjectCost per impression (cpm)en_US
dc.subjectDelegationen_US
dc.subjectOnline advertisingen_US
dc.subjectPricing modelsen_US
dc.subjectPrincipal-agent modelen_US
dc.titlePricing Models for Online Advertising: CPM vs. CPCen_US
dc.typetexten_US
dc.type.genrearticleen_US

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