• by Masha Geller , October 4, 2001

The latest announcement from Winstar Interactive Media is sure to further fuel the online pricing model debate.

Effective October 6th Interep Interactive Inc. online ad rep firms Winstar Interactive Media and Cybereps will no longer accept any Cost Per Action Campaigns unless there is a minimum cash guarantee to the rep firms and the sites they represent. Both Winstar Interactive Media and Cybereps represent a very select list of branded web publishers.

"Our sites do not want this business," says Winstar Interactive Media President and Interep Interactive COO John Durham. "This is not advertising, this is outright thievery!"

In an email message to his sales forces earlier this week, Mr. Durham wrote, "We are professionals and we should generate real dollars for our sites, for your efforts and for our companies. We will take a stand for the industry and refuse this business."

Cost Per Action campaigns are online ad campaigns where the advertisers pays the website (and its rep firm) only if web visitors click on a creative unit and take an action desired by the advertiser, such as clicking through to a particular web page, requesting more information, filling out a survey, etc.

"CPA campaigns hurt our clients several ways," says Mr. Durham. "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% of the risk and the rewards are few and far between. They are simply not worth our blood, sweat and tears."

But can Interep afford to refuse CPA business? CPA deals developed as an alternative to CPM (cost-per-impression) when banners results started plummeting (average click-thru rates on banners now hover at about 0.33%). In the traditional world, ad space is typically sold on a CPM basis, as determined by subscribers, viewers, or recipients; and there are auditing bodies that advertisers can turn to double check the claims of the media itself.

According to the Interactive Advertising Bureau (IAB), the model of choice among most online advertisers, comprising 50% of all deals, is still CPM pricing.

But cost-per-action pricing has been steadily gaining acceptance with advertisers, comprising 10% of all ad deals in the first half of this year, according to the IAB. When it comes to obtaining CPA deals, the largest advertisers like Microsoft, Amazon, VISA, Barnes & Noble, and Columbia House, have typically had the upper hand because they control the purse strings. Now, advertisers of all sizes are looking for CPA deals. And with the weakened economy, it's more of a buyer's market than ever before.

Is there room for compromise? Publishers and advertisers can and do come up with media buys that combine both CPM and CPA offerings. The IAB found that about 40% of all ad deals have been priced on hybrid models (part CPM, part performance), which is something IAB president Robin Webster considers "a healthy trend for the industry."