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.

5 comments about "It's Not the Banner, It's the Pricing Model".
Check to receive email when comments are posted.
  1. Gian Fulgoni from 4490 Ventures, September 8, 2009 at 8:28 a.m.

    I don't think the situation is as simple and clear-cut as you describe. It depends on whether you're the advertiser or the publisher. CPA, CPC and CPL are great from the advertiser's perspective because the advertiser doesn't have to pay for the view-thru ad impressions that also helped lift sales. But if I'm the publisher, I sure would want to get paid for the value of the cumulative buildup in impressions that weren't accompanied by a click but which did build brand awareness, favorability and, ultimately, sales -- whether those sales were realized online or in a retail store. To get at the real ROI of a campaign, I don't see any substitute for measuring its holistic sales impact - including clicked and non-clicked ad impressions. Anything else is unfair to the publisher.

  2. Wendy Hidenrick from AwesomenessTV, September 8, 2009 at 10:27 a.m.

    Gian is absolutely right. To assume that the only valuable impression is the one which was clicked, is a poor assumption. And when you need to generate awareness, buying impressions in bulk (CPM) is the best way to far. I'm sure we will discover a better system down the road, but it will have to be one which values both the advertiser's AND publisher's best interests.

  3. Zephrin Lasker from Pontiflex, September 8, 2009 at 11:43 a.m.

    Hi Gian and Wendy

    Thanks for your comments. With regard to publishers, we certainly do not recommend completely eliminating the CPM pricing model for all placements. We recommend that publishers rotate in CPC and CPL pricing models along with existing CPM models so that they can satisfy advertiser demand for ROI, and tap into the performance advertising space that is growing at such a rapid pace.

    If this is done correctly, publishers can increase revenue and eCPMs -- for example on certain sections of the website, a registration page or a mobile app, a publisher might generate more revenue by offering CPL advertising.

    We are not talking about a one size fits all approach. Rather we are talking about a mix and match approach.

    This article in Forbes ( shows just how much advertisers are willing to pay for actual sign-ups on news sites. In addition, this case study on MarketingProfs ( shows just how a website like used CPL advertising along with CPM advertising to double their revenue while at the same time fulfilling advertiser demand for ROI.

    I am happy to continue this conversation further. Please feel free to email me at


  4. Ari Rosenberg from Performance Pricing Holdings, LLC, September 8, 2009 at 3:47 p.m.


    I found your column both extremely thought provoking and very disappointing after learning what your company does -- as a columnist for Mediapost, I and others who contribute are very careful not to endorse our wares inside the walls of a column and I sure wish you would have done the same or at the very least, been more upfront about your business before you endorsed this CPL pricing approach.


  5. Eric Nelson from Comcast Spotlight, September 12, 2009 at 1:36 p.m.

    Mr Lasker,

    While I think we all recognize the importance of accountability, by stating that CPA and CPL are the standard of pricing models is one of the factors that has made the acceptance of display advertising much harder than it should be. Nearly every study, including ComScore's Whither The Click and many other reports from Mr. Fulgoni's company, as well as studies from Google/Doubleclick and the Atlas institute have shown that display adverstising is incredibly successfuly in purchase intent and brand awareness. By pegging our industry as purely a DR medium, and only asking for revenue when we drive DR, we have held back the shift of dollars from other, less used media, and driven down our eCPMs.

    As in all other forms of media, there is value in the impressions. If publishers do not hold to this standard, we as an industry will do nothing than cripple our ability to monetize content and our efforts.

Next story loading loading..