Cost Models provide the ability to charge Advertisers on a per-event basis (eg. a click event).
Simple Tenancy and CPM products maybe charged 'up front' for a set price, and hence do need to charge for 'events' and would use a 'Free Cost Model'.
Note: Cost models are not related to setup costs, or ongoing costs. See below.
Both setup and ongoing costs are charged in addition to any costing model configuration (see Products for further product information on setup & ongoing costs).
Supported Cost Models
Free Cost Model
No cost is assigned to ad ad impression, nor click event.
Most often used for simple Tenancy and CPM Ad Products that are paid for on contract purchase.
Position Stabilised Yield
Similar to the Yield Cost Model in that your actual cost is calculated as the amount required to maintain your position given your CTR/quality.
However the key difference is that the cost always increments as you move up through the result set. It is noticeable when your CTR is higher than the competitor below you. In the standard model you would pay less than your competitor, but in this model you must always pay at least $0.01 (or the smallest unit in your currency) more.
Detailed explanation is on Ad Auction and Ranking Example.
Examples:
Scenario 1
Ad A bids $2.00, predictive CTR is 3%, Ad B bids $1.50, predictive CTR is 1%. Product floorprice is $1.
Display Outcome:
The outcome will always be the same - Ad A will always get position 1, with B in position 2.
Costing
Ad B is charged $1 as this is the auction reserve price.
Cost for Ad A = $1.5 * 1% / 3% = $0.50. This is less than Cost B, so we set Ad A Cost as Cost B + $0.01 = 1.01$. Ad A is charged $1.01 for the click.
Scenario 2
Ad A bids $5, predictive CTR is 1%, Ad B bids $1, predictive CTR is 2%. Product floorprice is $0.50.
Display Outcome:
The outcome will always be the same - Ad A will always get position 1, with B in position 2.
Costing
Ad B is charged $0.50 as this is the auction reserve price.
Cost for Ad A = $1 * 2% / 1% + $0.01 = $2.01. So Ad A is charged $2.01 for the click.
Yield Cost Model
Calculates the cost to beat the yield of the ad below you. Cost for the lowest ranked ad is assigned the auction reserve price (i.e., the Product's floorprice). Cost for no the next and following ads is calculated as cost A = bid B * predictive CTR B / predictive CTR A.
Detailed explanation is on Ad Auction and Ranking Example.
Examples:
Scenario 1
Ad A bids $2.00, predictive CTR is 3%, Ad B bids $1.50, predictive CTR is 1%. Product floorprice is $1.
Costing
Ad B is charged $1 as this is the auction reserve price.
Cost for Ad A = $1.5 * 1% / 3% = $0.50. We then add $0.01 (the lowest currency amount allowed in the specified currency). Ad A is charged $0.51 for the click.
Over time, the Quality and Click Through rates may effect costing, whereby advertiser A may be required to pay up to $2.00 in order to compensate for a lower Ad quality. It works for Yield Cost and Position Stabilised Yield models.
Fixed Auction Bid Cost Model
The actual cost is always equal to the auction bid, regardless of other bids.
Examples:
scenario 1
Advertiser A bids $2.00, Advertiser B bids $1.50
Costing
Advertiser A is charged $2.00 for the click
Advertiser B is charged $1.50 for the click