Commentary

Get What You Pay For And Pay For What You Get...Or: How I Learned To Stop Targeting And Love The Results

by Mason Wiley , January 6, 2009

"Finish all your dinner," my Mom used to tell me. "Or you can't be a member of the clean plate club." Not wasting food earned me not only membership in that private collective, but also the reward that went with it, namely dessert.

Anyone raised by Depression-era-born parents was indoctrinated with the notion that waste is bad. Turns out that was good preparation for business. Executive leadership, like Mom, abhors waste of any kind. Unfortunately, online advertisers always find that some amount of waste is always inevitable.

Under the long prevailing cost-per-thousand (CPM) model of buying advertising, online marketers have to pay to reach prospects. The major problem here is: whose numbers do you trust? Evidence has emerged that page views cited by online publishers as a proxy for impressions are overstated, to say the least. And what's a page view worth, anyway? There is no guarantee that an ad is even seen. Heat map research shows that Web surfers, acting as their own internal TiVo, are pretty darn good at ignoring those online banners you spend your good money to place.

So as an online advertiser you do what advertisers have always done to improve their odds: you target. The Internet allows for not just the classic demographic and psychographic targeting but also behavioral and contextual targeting. Sure, it can help reduce paying for ad impressions that go nowhere. But this hyper targeting is giving consumers the heebie-jeebies and giving law-making bodies around the country a spanking new privacy issue to sink their teeth into. And in the end, even with all those fancy targeting schemes, you still end up paying to reach people not the least bit interested in what you have to sell. You spend a ton of money on online impressions that aren't impressive at all.

Fortunately, paying for the chance to maybe find a customer is not the only game in town. Now you have the choice to pay only for those ads that drive a customer to make a purchase, fill out a lead form, watch a video clip, or take some sort of conversion or engagement action. It's called cost-per-action (CPA).

CPA is risk-free and waste-free by definition. Eliminating clickers who do not convert, CPA delivers incremental new customers with predictable ROI. What's more, it's not dependent on targeting. So, consumers don't get hot and bothered about their privacy being invaded.

In fact, for savvy marketers, CPA can make targeting irrelevant. Using CPA, they can cast a wide net across the Internet universe (IU) and have their best prospects self-identify by responding. At that point, the advertiser can unleash all their best-practice CRM tactics to build prospects' relationship with the brand and convert them into a lifetime customer.

The fact that I work for a CPA ad network might make you think that I am overly biased and therefore not credible. No way! But you don't have to listen to just me. Listen to Bill Gates. Not only is he a proponent of CPA, he has predicted this form will eventually "change the economics of the search advertising market." Or listen to Google VP of Search Product & User Experience Marissa Mayer's public pronouncement that "CPA is the holy grail of targeted advertising." CPA has fans.

Apparently, fans are making waves. More forward-thinking advertisers are adding CPA into the online media mix and getting their feet wet slowly. CPA means advertisers have premium inventory as well as all the transparency they've enjoyed with CPM. Combined with the economic benefits of CPA's risk-free model, advertisers are more bullish now about testing it.

CPA is -- finally -- recession proof! With large and small retailers dealing with economic slowdown, CPA keeps products top of mind with consumers without breaking any bank. It's always true, too, that only one metric in advertising matters: sales. CPA, along with its cousin cost-per-engagement, will be the single driving force of online advertising in the years to come with costs that are tied to results and that deliver full accountability and, best of all, control.

It's a win-win. Give CPA a shot. If nothing else you get guaranteed membership into the clean plate club!

commentary

7 comments about "Get What You Pay For And Pay For What You Get...Or: How I Learned To Stop Targeting And Love The Results ".

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Scott Brinker from ion interactive, inc., January 6, 2009 at 10:51 a.m.
Hear, hear! At the end of the day, results are what matter. With CPM the advertiser bears all the risk for what is or isn't a quality audience or placement, with painfully asymmetric information. CPC is better, but CPA is ideal -- at least as far as an advertiser is concerned.
Of course, CPA brings you straight into the middle of post-click marketing -- the landing experiences that respondents are given upon making that first click. While getting quality clicks is certainly an important variable into that equation, a greater portion of the outcome is dependent on the quality, creativity, and continuity of that experience -- and ultimately the value delivered to the respondent.
I think the industry as a whole is waaaay overdue to focus more on post-click marketing. Whether or not publishers can/should/will share responsibility for that is an interesting question.
Reply

Stefanie Nelson, January 6, 2009 at 10:59 a.m.

Great article. Since the mid 90s, I'd pushed for publishers to use ad load instead of page view as the standard for ad impression, clearly with little success. It now seems publishers will be forced to adopt the CPA model or risk either facing a backlash from privacy advocates, or losing revenue to competitors who are willing to offer a CPA pricing model.

Chris Carpenter from Genral Mills, January 6, 2009 at 11:21 a.m.

Great points, and now is absolutely the time to get in on CPA models. As the industry moves, the actual CPA a company pays will continue to increase (ala AdWords over the past 4 years) and networks/publishers will have even greater ability to pick and choose their advertisers (and prices).

Chris Murdough from The Allant Group, January 6, 2009 at 1:25 p.m.

CPA definitely alleviates any risk for marketers, but what's in it for publishers? Without audience targeting techniques at their disposal, what's a publisher to do to monetize perishable ad impression inventory...? The online advertising ecosystem depends on both marketers and publishers getting value out of the exchange

Edmund Carey from Undertone Networks, January 6, 2009 at 2 p.m.

Disclosure: I work for a CPM network. That said, there are brand sensitivity risks for marketers - not technologists like Gates or Googlers - when buying CPA that are undeniable. I agree the model will ride a successful wave this year, but worth mentioning that countless Fortune brands wouldn't think to buy CPA owing to these risk factors. I could list several URLs off the top of my head that compromise the integrity of commercial brands that have been around for decades...worth noting.

Paula Lynn from Who Else Unlimited, January 6, 2009 at 6:13 p.m.

All of you who remember CPI and the reasons why publishers would not comply please sit down. Outside of an online ability to count time encountered per click on, there are unmeasurable impressions a publisher produces for a client. See your PR departments for details before you sit down, too. Then there's that little thing of proof that someone did or did not click on a site directly because of a certain number of impressions. While all of this measuring is in progress, all of you who are left standing, please include how publishers can meet their financial obligations so they can provide you content for your CPA. In other words, this is not quite as direct as it counts.

John Grono from GAP Research, January 6, 2009 at 10:09 p.m.

While I concur that CPA is preferable to CPC, I'm still not sure that the label "risk-free" is warranted. Last data I saw was that a good click-through rate was 0.3% online and as high as 3% on mobile. While it might make sense to only pay for the 3-30 people who clicked-through and made it into the 'acquisition' bucket, what about the 970-997 people who (at best) simply ignored your ad (zero out-of-pocket cost under CPA), but who may also have been p***ed off with your online ad?

Recently here in Australia my home-page site was 'taken-over' by an incessant half-screen pop-up every time I hit the home page. The first time was very annoying, the next time was extremely annoying and by the third time I vowed never to buy or consume that brand. Because I did NOT click (apart from 'close' when I eventually found the microscopic well-hidden close button) on the ad I don't count in the metrics. With click-through rates as low as reported there could very well be more audience on the negative side of the ledger that are not being accounted for than on the positive side of the ledger!