Pricing
A publisher may charge defined prices for performance-based advertising, so much per click or call, but it is common for prices to be set through some form of "bidding" or auction arrangement. The advertiser states how much they are willing to pay for a user action, and the publisher provides feedback on how much other advertisers have offered. The actual amount paid may be lower than the amount bid, for example 1 cent more than the next highest bidder.
A "bidding" plan does not guarantee that the highest bidder will always be presented in the most prominent advertising slot, or will gain the most user actions. The publisher will want to earn the maximum revenue from each advertising slot, and may decide (based on actual results) that a lower bidder is likely to bring more revenue than a higher bidder - they will pay less but be selected more often.
In a competitive market, with many advertisers and many publications, defined prices and bid-based prices are likely to converge on the generally accepted value of an advertising action. This presumably reflects the expected sale value and the profit that will result from the sale. An item like a hotel room or airplane seat that loses all value if not sold may be priced at a higher ratio of sale value than an item like a bag of sand or box of nails that will retain its value over time.
A number of companies provide products or services to help optimize the bidding process, including deciding which keywords the advertiser should bid on and which sites will give best performance.
Read more about this topic: Performance-based Advertising