Updated: Apr 25
Based on the Wondery podcast of the same name, the story of how WeWork grew from a single co-working space into a global brand worth $47 billion in under a decade and then, in less than a year, its valuation plummeted it’s worth a binge-watch session.
How can we understand the complex difference between a Cost Per Action (CPA) and CPL (cost per lead) in a marketing strategy through AppleT V+’s docuseries WeCrashed starring Jared Leto and Anne Hathaway at the center of it all?
Stay with me.
In episode 4, Adam learned that his company would inevitably lose 400 million in the current year. So instead of looking into the unnecessary expenses incurred, Adam decides to bring another investor on board. Adam tells his assistant to book him a flight to Tokyo as he wanted to meet a businessman named Masayoshi Son, founder and CEO of Softbank. He is told that Masayoshi Son was not in Tokyo but attending a flagship initiative by the government of India called Startup India. Adam makes a hasty decision and books a flight to India directly. His assistants contacted the organizers and got him a speaking slot.
After stalling more than once to meet Adam after he heard his delivery on the summit, Masayoshi Son finally met him. He tells Adam that he knew the reason why his speech was focused on loneliness during the Startup India conclave. Masayoshi knew that Adam wanted to grab his attention. (ultimately this is what all marketers want)
How does this explain the difference between CPA vs. CPL?
CPA stands for Cost Per Action and is essentially a model where leads are only paid for if they complete an action — such as buying a product.
CPL stands for Cost Per Lead and is a model where leads are qualified into genuine prospects before being sold.
So what’s the difference?
Instant Gratification vs. High Ticket Deals
With a CPA model, the conversion happens immediately. The sale is made, and the advertiser or affiliate gets paid. This works great if you are advertising a high-volume, low-cost product or service.
With a CPL model, the first actual exchange of money between the prospect and the lead buyer could be many months away. But when it converts, it will probably be a very profitable conversion.
Adam Neumann was a speaker in Startup India, an initiative to fund and support start-ups worldwide. You go on stage, deliver your pitch in front of hundreds of investors, and hope to get CPAs (actions from anybody who heard the speech) immediately, instead of focusing on the quality of who will do the action eventually.
This cost per action would have justified the travel expenses and logistics to get Adam to India, but he wasn’t aiming for that. He was not interested in getting contributions from random interested people; he was aiming for the CEO of Softbank. Just THE one qualified lead he cared about.
So the instant gratification would have been for him to raise several rounds of smaller capital injections, but instead, he waited for months until that lead he had been working on, came through. The wait and investment were worth the wait when Masayoshi Son agreed to make a whopping investment of 4.4 billion dollars in WeWork.
It might seem like a CPA model is a one-night stand, whereas a CPL model is a serious and committed relationship.
And in a sense, this is true. But using a mixture of CPA and CPL can really boost campaign results, especially if we monitor the results and optimize the appropriate campaigns.