• by Masha Geller , June 7, 2002

One of the biggest stories in the online advertising world in October was the announcement from Interep's Winstar and Cybereps divisions, who said they would no longer accept any Cost Per Action campaigns unless there is a minimum cash guarantee to the rep firms and the sites they represent. We first reported on this in our MediaDailyNews enewsletter on the morning of the release, and almost immediately, my inbox was flooded with reader responses, which at first were almost equally divided on the pros and cons of the announcement. The weightiest argument against CPA pricing came, of course, from Winstar Interactive Media president and Interep Interactive COO John Durham, who said, “Our sites do not want this business. CPA campaigns hurt our clients several ways: They take up an incredible amount of inventory for which our clients receive no compensation and the sites have to eat ad-serving costs. With these campaigns we take 100 percent of the risk and the rewards are few and far between.”

Another opponent of CPA was Phil Hulett, director of sales at Clear Channel Interactive, who said that he and many others in the industry have “taken on the crusade to raise the collective psyches of Internet ad salespeople. The longer we continue to believe there is no value to our inventory, the longer savvy advertisers will continue to take advantage of us.” He said that CPC, CPA and other phrases are “simply euphemisms for free advertising,” and the tide is turning.

Suffice it to say that the weightiest pro-CPA arguments on that first day of debate came from CPA networks who bored me with sales pitches and the token tagline: “Our CPA advertisers are consistently coming back.” That, and everyone references the latest IAB report, which found that 10 percent of all online ad deals in the first half of this year were performance-based and 40 percent were hybrid CPM/CPA deals.

On day two of the debate more responses poured in, and the CPMs clearly had it: The age-old method of buying impressions by the thousand is widely preferred by our readers (or at least those who took the time to weigh in on the issue). Interestingly enough, most of the responses I got were from web publishers. Everyone seems to agree with Phil Hulett. Most started out with, “Who wouldn't come back to free advertising?” Another popular argument against CPA was that it doesn’t really exist in traditional media (except for Per Inquiry Advertising in broadcast) and therefore has no place online. Not a single advertiser —and we've been told time and time again that advertisers LOVE performance-based pricing models —went to bat for the technique.

The one seemingly compelling argument in favor of performance pricing came from Irv Brechner, chief business development officer at Direct Net Advertising.net and editor of their recently launched Successful Performance Marketing Report. He said advertisers “pay the bills and they’re going to spend it where they want to. Taking a stand against performance marketing will have one simple result: advertisers will go elsewhere where performance marketing flourishes. If you’re a web entity with traffic, weigh this issue carefully, because, according to Forrester Research, 53 percent of all online advertising will be performance based, by 2004.” Of course, it should be noted that Direct Net Advertising is a performance-based marketing company. Care to weigh in?

Masha Geller is Editor-in-Chief of MediaPost. She may be reached at masha@mediapost.com.