Commentary

CPSA: The New Pricing Model For Social Media?

What's the best way to price social media advertising or marketing programs?

That's one of those questions that screams for the ever-honest "it depends" answer. Maybe that's because we need a new pricing model. Let's first take a look at some current options and review their strengths and weaknesses in this context:

  • Cost Per Impression (CPM): It's great for branding, which is the overarching strength of social media. But the value marketers get from social marketing isn't just exposure -- it's something deeper.

  • Cost Per Click (CPC): The model that made Google what it is won't do the same for Facebook, at least not on the same kind of scale. CPC is tailor-made for direct-response marketers, while social media is centered on building relationships. This is the classic "square peg/round hole" issue.

  • Cost Per Action (CPA): We should be able to put this to rest easily, as marketers shouldn't be driving a relationship-building vehicle on a conversion track.

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  • Cost Per Engagement (CPE): This gets closer, as some engagement metrics translate well to various social marketing programs, such as time spent with a widget or percentage of a shareable video viewed.

    When you want exposure, traffic, conversions, or interactions, each of these four pricing models comes in handy. But social marketing, when done right, achieves something much different: relationships. How does that fit in neatly with these pricing models?

    To that end, I'll throw out a fifth model: Cost Per Social Action (CPSA). It's for any action with a distinctly social quality that leads to either new relationships (such as through "viral" referrals or acquiring new followers and fans) or deepening existing relationships (such as through "likes," comments, responses, and ratings).

    The main benefit of CPSA is that marketers know they're paying for something social and relationship-oriented. More importantly, marketers know they're not specifically paying for exposure, traffic, conversions, or interactions (though those can all provide additional value). It's an acknowledgement that social media is something else, so it's deserving of a new model, one that stresses relationships above all else.

    There are downsides too, and I'll spend even more time on these:

  • It's a new model. The alphabet soup is too crazy already. There are others too, like CPL (Cost Per Lead) and CPS (Cost Per Sale). So now marketers have to learn another?

  • Look at the publisher or vendor side too - they now have to sell yet another pricing plan? Then again, some publishers like VideoEgg have used Cost Per Engagement pricing to differentiate themselves. Could some differentiate themselves by promoting CPSA?

  • There are too many letters. Come on, at least simplify it to three letters so it stands a chance. Though you could argue that to stand out, maybe the four-letter version will differentiate it.

  • It's vague. A social action can mean so many different things. Just looking at Facebook alone, can you really say that the same pricing structure can be used to cover everything from the number of fans accumulated to the number of virtual gifts sent? Then again, CPM covers everything from an impression on a portal's homepage to an impression that's highly contextually relevant on a blog. Similarly, CPC is used for search and contextual marketing, two very different approaches.

  • There are already even more specific social metrics, such as CPI -- a Cost Per Install model for widgets. CPSA doesn't account for enough of the intricacies of social media that are already being addressed directly.

  • What's a social action worth anyway? The further anyone veers from reach and sales, the harder it's going to be to tie this into marketers' traditional metrics.

    I'll leave it to you now: is CPSA needed? Are some already using a version of it? Is this latest version of alphabet soup past its expiration date? Share your thoughts in the comments to address CPSA the way it should be: socially.

  • 24 comments about "CPSA: The New Pricing Model For Social Media?".
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    1. Gianluigi Cuccureddu from Agora Media Group, August 4, 2009 at 3:15 p.m.

      CPSA is needed in the end, but first companies need to understand the impact of social media and what it can and what it does. The need for an direct CPSA is what we want right now, but that are conventional / old metrics for new things.

      Best regards,
      Gianluigi Cuccureddu

    2. Bruce Christensen from PartyWeDo, August 4, 2009 at 3:30 p.m.

      We decided to just go wild and call it the Banterithm for our party network. We use an algorithmic measurement system that logs every part of our party banter and engagement process.
      In the end, a party attendee is presented with an award for being the "life of the party", as calculated by the Banterithm.
      And the Banterithm gives us an accurate measurement of how engaged each party goer was while they played with their friends and family members.

    3. Eric Speeth from Triad Digital Media, August 4, 2009 at 3:31 p.m.

      Great Post! More and more, there is a need for an industry standard methodology to generate a pricing model around social media marketing. Expanding on the CPSA idea, Consider maybe a score card method where certain predefined actions are set at various values depending on where they are displayed within a site (homepage vs. user profile page, etc...), then those are aggregated to create an overall price per social action. This would open the door for better benchmarks. Also, if reported on appropriately, it would be a way to assist marketers in determining what actions create the most value for them. This might, in turn, help facilitate a healthier knowledge of what works on soc nets and increase advertising patronage (as i know many advertisers are extremely skeptical to step outside the box in our current economic state).

    4. Karen Renner from VML, August 4, 2009 at 3:35 p.m.

      I absolutely think this should be a standard metric.

      Oftentimes we measure social media campaign success by total fans, interactions, time spent, etc. but do not always analyze from an overall cost per social interaction standpoint.

      Third party ad servers should start leading the way and tracking/calculating this metric. If industry benchmark data for this metric could be established as well, that would help sell it through as a new standard.

    5. Ryan Rasmussen from Zocalo Group, August 4, 2009 at 3:37 p.m.

      CPSA is a great idea David.

      Where many measurement tools are focused just on awareness, it highlights the value of an engaged community and the artifacts of driving sustainable word of mouth through meaningful relationships.

      Ryan Rasmussen
      Associate at Zocalo Group
      http://zocalogroup.com

    6. Jonathan Hall from American Pop, August 4, 2009 at 4:01 p.m.

      I always envisioned the ultimate Social Media Marketing Metric being akin to the Slugging Percentage in baseball. Measuring all the major things that can be measured (impressions, clicks, content placement, pass-along, re-tweets, sentiment, etc.) and averaging them together to give a metric to a social campaign. The Slugging Percentage in baseball averages together Batting Average, On Base, Singles, Home Runs, etc. and puts a metric to how valuable a hitter is. A Social Media campaign can yield low impression numbers at face value (100's of Thousands) yet hit a target so precisely and activate them passionately that it's much more valuable than 100 Million impressions from banner ads or Google Ad Words. Just like a hitter who bats .280 and gets walked a lot is more valuable than a hitter who bats .300 and strikes out all the time.

    7. Kaila Colbin from Boma Global, August 4, 2009 at 4:19 p.m.

      Hey there David,

      I think this is a great idea as well. What you measure determines how you behave, and if you're measuring social actions (whether they're fans of a page, retweets, or referrals), you'll be behaving in such a way as to drive that behavior. Well done.

      Cheers,
      Kaila

    8. Adam Green from CenterMedia Partners, August 4, 2009 at 5:34 p.m.

      I think that this concept is spot-on. However, David briefly touches on a very important point; How much is a social action worth anyway?

      It seems a reasonable argument to say that a social action such as "Liking" something on Facebook would be less valuable than, say, a comment, a ReTweet, some combination thereof, etc. One action clearly takes more effort and thus one could assume that the person taking the action is more incentivized to spread the word. There has to be some way to value the reach that each social action has on a user-by-user basis. I.e. - How much is a social action worth if taken by someone with 100 friends or followers, versus, say, a social action by Ashton Kutcher on Twitter? Third party validation is only as good as the selling power/ brand equity of that third party! There's a reason that we haven't seen "Maury's Book Club" ;)

      Obviously, there is a need for clearly defined tracking and real time valuation based on the tracking results. If this is not closely and carefully monitored, it opens up an array of potential problems from scams and programs to who knows what.

      In summary, David has a great concept and I believe it is the right one. (We at CenterMedia Partners have been using a similar type of model for a while now, but have yet to perfect the tracking component). We just all need to be careful to monitor this model as closely as possible so as to not de-legitimize the social media marketing platforms that are becoming so valuable for us as marketers.

    9. Adam Green from CenterMedia Partners, August 4, 2009 at 5:36 p.m.

      I think that this concept is spot-on. However, David briefly touches on a very important point; How much is a social action worth anyway?

      It seems a reasonable argument to say that a social action such as "Liking" something on Facebook would be less valuable than, say, a comment, a ReTweet, some combination thereof, etc. One action clearly takes more effort and thus one could assume that the person taking the action is more incentivized to spread the word. There has to be some way to value the reach that each social action has on a user-by-user basis. I.e. - How much is a social action worth if taken by someone with 100 friends or followers, versus, say, a social action by Ashton Kutcher on Twitter? Third party validation is only as good as the selling power/ brand equity of that third party! There's a reason that we haven't seen "Maury's Book Club" ;)

      Obviously, there is a need for clearly defined tracking and real time valuation based on the tracking results. If this is not closely and carefully monitored, it opens up an array of potential problems from scams and programs to who knows what.

      In summary, David has a great concept and I believe it is the right one. (We at CenterMedia Partners have been using a similar type of model for a while now, but have yet to perfect the tracking component). We just all need to be careful to monitor this model as closely as possible so as to not de-legitimize the social media marketing platforms that are becoming so valuable for us as marketers.

    10. Jim Dugan from PipPops LLC, August 4, 2009 at 6:29 p.m.

      CMA - Cost per Monetized Action - social, e-coupons or otherwise.

      CMMA - Cost per Monetized Mobile Action -social, e-coupons or otherwise.

    11. Jennifer Juckett, August 4, 2009 at 7:02 p.m.

      I think David is right on.
      The existing model don’t really cut it for measuring the realm of social actions- and you're right - social marketing when done correctly isn’t about “clicks”, or "conversions", but is about building relationships. Great post!

    12. Geoff Pickering from Blue Brahma, August 4, 2009 at 7:56 p.m.

      I agree we need another TLA (three letter acronym) like we need a hole in the head.

      That said - I like the fact that you're keeping this dialogue alive.

      I like CPSA because (as you said) it gives us something we can share with our client so that they feel like they're paying for something social and relationship-oriented.

      On the other side of the pancake.

      I don't like CPSA because (to your point) it is vague. The tactics recommended within a Social Media plan are as varied and unique as a fingerprint. To compound this issue CPSA basically seems to me to be a new higher level model that uses key performance indicators that could be applied to Social Media plans right now but are more independent and isolated:
      - Repeat Rate
      - Time Spent Rate
      - Take Rate or Download Rate
      - Send to A Friend Rates
      - Comment Rates
      - Linking Rate

      Maybe we should consider looking at the tools available to us that listen to the social ecosystem (BuzzMetrics, Spiral16, Radian6, etc.) and the results our efforts produce. In the social space, what has our current spend created in terms of conversation/relationship sentiment (positive, level, or negative). A possible measure could be around the impact our efforts have on that sentiment score and our ability to sustain a positive level.

      Just thoughts - thanks for keeping this discussion alive.

    13. Patrick Fitzgerald, August 4, 2009 at 9:38 p.m.

      This post represents a good social exercise, but we are working around acronyms and metrics on a media that has yet to be defined in use, if we are not certain what the best use is, how will we measure it? As the medium evolves the relevant measures will reveal themselves. I do like the Slugging Percentage that Jonathon Hall presented, good thought.

    14. David Berkowitz from MRY, August 4, 2009 at 11:33 p.m.

      Really fascinated by this discussion and am trying to digest everyone's thoughtful responses - I'll contribute more soon, but wanted to drop a quick note of thanks to everyone for sharing your thoughts and I'm excited to see how this evolves. The more I think about this, the more I see CPSA filling 'some' role out there, but we do have to answer a lot of the questions that have come up throughout these comments.

    15. David Wilson from AMN Healthcare, August 5, 2009 at 1:35 p.m.

      Isn't CPSA just one type of CPA? Typically you define the action you want to track, then determine the CPA. For social media, you may just have different actions you want to track, but I think it still fits under the CPA umbrella.

    16. David Berkowitz from MRY, August 5, 2009 at 3:35 p.m.

      A quick note to David Wilson (I'll respond more to others too), but as far as CPSA being part of CPA, the big reason I'd argue against that is CPA has been driven by lead generation and conversions - it's entirely a DR tool. It's also why Cost Per Engagement doesn't work as part of CPA - engagement implies some sort of action too. So that's why I don't think it fits.

    17. Jeff Larche from Digital Solid, August 5, 2009 at 3:50 p.m.

      I agree with some here that CPSA has value. Its vagueness, I contend, can be overcome with time and experience.

      I've been helping to construct scoring models for clients, to help them estimate the ROI of their campaigns that include social media.

      The models track what Jim (above) calls "CMA - Cost per Monetized Action." (I don't call it that but may start!)

      My models also track that more vague engagement: How many have followed, interacted, etc. -- i.e., the Social Action (the SA) of your CPSA. Although we can't make a direct correlation to ROI now, over time we can fiddle with the scoring to become more predictive of future spending.

      In the meantime, it's training my clients to focus on the costs/benefits of these social components to campaigns.

    18. Kerry Lange from Yahoo!, August 5, 2009 at 8:59 p.m.

      This is a great post and I appreciate seeing everyone's feedback. I'd like to address your last point here: "What's a social action worth anyway?" (I think Adam Green touched on this a bit but I'll go deeper.)

      This is inherently the issue we're facing - that you can't really measure this directly. I can engage a consumer in an experience, after which they might post to their personal blog, tweet, and post a Facebook status. So that's three actions, but what's the reach of their networks? If they have 1000 twitter followers, 500 FB friends and 2000 blog followers - can you justify that the reach of those three actions is 3500 people? Can we consider those "broadcast impressions" or are they something new entirely? If only 48% of FB users log in on any give day (per FB analytics), did they all actually see the update? And how then do you quantify the comments and conversations that result from those broadcasts?

      I'd love to hear how any of you are approaching this issue - if at all.

    19. Kerry Lange from Yahoo!, August 6, 2009 at 4 p.m.

      Nice work Eric, my team is digging in to this now to see if this is relevant for what we do.

      We are clearly in a new era of defining reach, similar to back in the day when a definition was developed for TV, Print, radio and PR "impressions." I'd love to see an organization or group take a stand and start developing some standards around social media "impressions." Eric, I think you're on the right track at the very least. If you haven't already, you should throw your opinions in the mix here: http://measurementcamp.wikidot.com/start

    20. Troels Smit, August 9, 2009 at 4 p.m.

      Love the idea as it aligns incentives and creates new opportunities. Also Marketers can "easily" assign a value to a social action in terms of the effectiveness on reach/sales, so it should be a go from the business side.

      Maybe the challenge will be to scale the model?

    21. David Berkowitz from MRY, August 10, 2009 at 3:29 p.m.

      Along with discussing it here, I also started an entry in Wikipedia. I intentionally kept it very basic as I don't want to be the sole arbiter of the definition, but if there are other good citations or references of this out there, you can contribute to http://en.wikipedia.org/wiki/Cost_per_social_action

    22. Frank Dangelo from Catalano,Lellos and Silverstein, September 24, 2009 at 4:45 p.m.

      I applaud the idea to devise some industry accepted metric to quantify the value of social media interaction. But I'm a bit concerned the suggestions offered seem to mirror the mistake our industry made in selling banner advertising on strictly/primarily behavioral metrics; i,e disregarding the value of attitudinal metrics??
      By it's inherent nature Social Media has significant opportunity to affect attitudes....At risk of complicating the discussion, perhaps CPSA could reflect a hybrid metric ( attitudinal + behavioral?). Perhaps not appropriate for all social media initiatives, but the attitudinal benefits should not be disregarded......just a thought

    23. Evan W from Experience Advertising, Inc., December 29, 2009 at 11:18 a.m.

      I just saw this. I think more trackable social advertisnig platforms will develop in the next year. I'm using SponsoredTweets and some other twitter ad things but there aren't too many choices right now...

    24. Craig Leaming from Strategic America, December 29, 2009 at 1:13 p.m.

      Sales is now and always has been about relationships. Oh sure there will always be someone promoting the "new best thing", but success always depends on relationship. What is a relationship worth? It is worth the difference between success and failure, short term and long term partnerships and if you have to hunt for your next customer, or if it is given to you by your already established relationship. Social media works by keeping relationships relevant, CPSA does exactly that in pricing social media. I like it David!

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