It's Not the Banner, It's the Pricing Model
Although it looks to some financial analysts like the worst is behind us, it's certainly not time to pop the champagne bottles just yet. The economy is still technically in a deep recession. While we brace for another year or two of tight marketing pockets, we should also take a moment to remind ourselves that despite how hard times have been, we've learned some valuable lessons that should be followed even when budgets begin to flow again (lest we find ourselves right back in the same situation again).
Recession or no recession, there are certain trends that will stand. According to the IAB, revenue from CPMs was down 6% last year. This reflects not only a tough economy, but a growing awareness that paying for impressions does not provide the insights or the ROI that marketers are looking for. When advertising budgets bounce back -- and they will -- we need to remember that challenges to the CPM model have been a long time coming, and that those issues will not simply disappear when the economy recovers.
Marketers are looking for accountable ways to advertise online. That demand has pushed attention toward performance pricing models: CPC, CPA, and CPL. CPC is a highly effective model for ROI. While Google may not have met market expectations, it still grew revenue by 3% in a very challenging economic climate. Much of CPC's success is due to its value as a direct-response model. It's worth mentioning, however, that CPC is often used as a counterpoint to CPM's shortcoming. Together, they represent the very coveted, much-hyped "synergy." Think back to the search and display synergy reports of 2007, where according to Microsoft's Atlas Institute, the combined impact of search and display caused a 22% lift in overall conversions (as opposed to search alone).
However, there is a difference between ad format and pricing model. Just because exposure to display banners has a positive effect on brand awareness and purchase intent doesn't mean that CPM is the best way to purchase display advertising. As advertisers reach for higher ROI, even in their branding campaigns, it's time to reevaluate the way we think about the banner, and how we pay for it... not just in the immediate future, but for the long term.
There are performance pricing models that bridge branding and direct response in a way that the CPM model never could. When go up the ROI ladder from CPM and CPC, we often go straight to CPA and CPL -- and we often use the two interchangeably. But there are major differences between these models. CPA is based on transactions -- credit card applications, loan inquiries, etc. It represents low volume and is better suited for ecommerce than branding. CPL, on the other hand, is about acquiring contact information from consumers for re-marketing purposes.
About two years ago, CPL was in the news for all wrong reasons: re-selling of sales leads, questionable opt-ins, and poor customer experiences. However, since then, there have been striking improvements to the space. Now, CPL means high-volume marketing leads that are brand specific, never resold, and uncompromisingly opt-in; and new platforms have emerged that feature total transparency and openness.
Now, advertisers can run banner ads on a CPL basis, and brand favorability stays intact. And, because marketers only pay when people explicitly sign up to hear from them, there's no greater return on investment out there. It's no wonder, then, that CPL has seen tremendous growth even in tough economic times, and why the model is poised for success even when things look better.
The biggest lesson we have learned from this period is that demanding measurable, brand-positive online advertising is not asking too much. It's not the banner that's the problem; it's the way we pay for it. The right kind of advertising should have both brand impact and strong ROI. It's not too much to ask for ... and it's already here.