Pay for Performance Advertising, or P4P, is a term used in Internet marketing to define a pricing model whereby a marketing agency will receive a bounty from an advertiser for each new lead or new customer obtained for the advertiser through the agency's online marketing efforts. The agency creates advertising campaigns and promotions to convert the maximum number of new leads or customers and gets paid for its work only when a new lead or a new customer is passed on to the advertiser.
P4P advertising became popular with the advent of the internet that allows real time measurement of a marketing campaign's ROI (return on investmentt). It has reversed the traditional value proposition of advertising whereby an advertiser is required to pay for the creative work of the advertising agency and the media first regardless of the return on investment of the campaign. In the P4P model, the onus is on the agency to create a performing ad campaign that converts into good leads or customers if the agency wants to receive payments from its client. In contrast with traditional advertising agency pricing models, the advertiser pays the agency only after having collected leads or the revenues from its customers' purchase orders and not before.
Pay for Performance need not to be confused with pay per click (or PPC), which is a pricing model on the Web in which the advertiser pays when an Internet user clicks on its advertisement and visits its site. P4P is generally risk-free to an advertiser whereas in a PPC campaign the advertiser takes the risk of the conversion rate between a click, a visit and an actual lead or sale.