Why do most popular adnetworks prefer to charge CPC or CPM, instead of CPA?

I can't speak for specific networks as that is a broader strategy decision they have specifically made to position themselves in the market.
That said, we need to have a bit of a history lesson.

It kind of all started when Google decided to introduce this little model called CPC or Cost Per Click. The reason they did it was because advertisers were sick of paying for wasted impressions and wanted something a bit more performance oriented to mitigate some of their risk.

Risk is an important part of this answer--we'll come back to that in a moment.

So Google ended up doing pretty well with this model, and it was in no small part because they were skilled in their ability to serve up relevant ads that *gasp* got clicks.

Then everyone latched onto the CPC model and a lot of networks did well because they had desirable traffic sources, and their models removed some of the risk (there's that word again).

Well, affiliates had been around for a while now, and they really pioneered the CPA model. As the space evolved, you had some networks that realized that they could essentially act as affiliates, and charge a CPA, and unlock the affiliates, they set their rates AND had all the advantageous information they needed to maximize their spread whilst arbitrating CPM and CPC-based buys into CPA rates for their customers. Lots of advertisers love this model as it is very predictable, and minimizes risk. That said, there are downsides.

So this brings us back to your original question--why do the most popular networks use CPC and CPM models instead of CPA.

So first there are those downsides I mentioned just now. These downsides are largely on the advertiser side of all places. Simply put, in exchange for the significantly lowered risk, there are almost ALWAYS significantly higher rates as a result. This means your ROI/ROAS/EPC or whatever is typically much lower with a CPA network than it would be if you were going straight to the traffic source and buying directly. CPA networks are almost always middlemen (not all, but most). Anytime you have a middleman, you are paying more for the privilege.

Additionally, on quite a few of these networks, there is a complete lack of transparency--they are black boxes. Sure their sales reps will tell you at a high level where things come from, but even some networks with good reputations that have been around for a while broker their traffic six ways to Sunday, especially in this day and age of tighter publisher margins due to better targeting technology. Many advertisers don't care. Unless they have a brand to protect where they need to make sure it doesn't run in a disallowed location with a disallowed message by some affiliate of an affiliate of the network. Or if they need to make sure that the network is not cannabalizing their existing traffic (such as bidding on their brand terms on Google and not only jacking up the advertisers CPCs on their brand terms due to competition, but also charging them a ridiculous premium for any leads they generate from said brand terms).

Beyond that, volume can be a real bitch. You see, these advertisers want something on a CPA rate, but they are very particular about what they consider to be qualified. So it becomes a constant struggle between the advertiser and network where one tries to push the other to be more stringent in how things are qualified, where the other does the reverse to maximize volume and spread. It is not a very amicable relationship in that sense since if they are both doing their jobs right, they are inherently trying to make it a worse business deal for the other.

When you charge for clicks, there's much less wiggle room. Sure, you have fraudulent clicks, but those are much easier to take care of than arguing back and forth for refunds on leads because certain fields weren't filled out or whatnot. And when you're driving clicks, and not customizing a CPA for each advertiser, your inventory becomes much more homegenous. As a result, sales are streamlined, and it is very easy to compare things in an apples to apples format which as it turns out, makes it much easier to design kickass features to deliver more value to a wider audience with fewer resources. Just ask Google.

And then you have those networks (and now exchanges) that are still on the CPM track--what's up with that business?

Well, display targeting technology has come a long, long, LONG way over the past couple of years. It is no longer the red headed step-child of the digital direct response world (apologies to all red headed step-children out there). In fact, with the right data partners, enough data for optimization, and targeting capabilities, it can actually be a LOT more efficient than CPC methods because you are bidding on each individual impression and can thus filter at the next higher level above CPC. A CPC-based network is in a sense arbitraging impressions into clicks, with their spread coming between what they sell clicks for and what it costs to drive those impressions, so if you remove that level/middleman and go straight for impressions, you are essentially dealing with "raw traffic" in the purest sense, and thus can get the cheapest rates. They also incidentally end up taking on the most risk at this point as you are not filtering by any form of quality beyond the data you have to target from. Someone who clicks is pre-qualified by the fact that they read your ad and clicked it, and someone on a CPA rate has taken an action. There is a premium paid for each level of pre-qualification, so the closer you get to the source, the greater your risk, and the greater your potential reward.

So the TL;DR of this is essentially that CPM networks often times can be the most efficient out of all three types, and thus draws the dollars of advertisers who have the capabilities and technology to take advantage of that to squeeze even better performance out of their media.

 

Interesting topic.

To put it shortly, I believe it has a lot to do with ad networks serving traffic to a wider audience and mitigate risks. CPM and CPC are much predictable and easier to track. Also, it is easier for buyers to buy traffic in bulk and optimize costs based on their goals: sales, leads, awareness, sign-ups, etc.

 

I agree with your point of view.

 

Most popular ad networks prefer to charge on a CPC (Cost Per Click) or CPM (Cost Per Mille) basis rather than CPA (Cost Per Acquisition) for a few reasons:

1. Risk management: With CPC and CPM models, the risk is primarily on the advertiser, as they are paying for clicks or impressions rather than actual conversions. This reduces the risk for the ad network in case the campaign does not lead to a conversion.
   
   
2. Predictability: CPC and CPM models provide more predictable revenue for both the ad network and the publisher. Advertisers can estimate their costs more accurately, and publishers have a steady stream of income based on clicks or impressions.
   
   
3. Larger market: CPC and CPM models are more widely used in the advertising industry, making it easier for ad networks to attract a larger pool of advertisers and publishers who are familiar with these pricing models.
   
   
4. Scale: CPC and CPM models are easier to scale, as they are based on clicks or impressions rather than specific actions or conversions. This allows ad networks to reach a larger audience and serve a higher volume of ads.
   

While CPC and CPM models are more common, some ad networks do offer CPA pricing options for advertisers who are looking to pay based on specific actions or conversions. It ultimately depends on the goals of the advertiser and the capabilities of the ad network.