Commentary

Does Transparency In A CPL World Really Solve All Our Problems?

Transparency seems to be heralded as the next big thing for the CPA/CPL marketplace. But does it really address all of the problems associated with a CPL model: brand control, quality of lead sources, context of offer placement, etc.? I think the issue of transparency brings up a few important questions for both advertisers and publishers alike: 1) Is this scalable? , 2) Is it really possible, given the truth of network models and 3) what specific problem does it really solve for advertisers in this channel?

Open and transparent networks seem to be popping up everywhere today; there's Pontiflex and Opt-Intelligence; last summer, Hydra Network launched Hydra Elite, a transparent network offering advertisers the selection and control of publishers on a CPL model. The transparency model promises that advertisers will remain in control of their brand, selecting trusted and contextually relevant publishers to run their offers.

For roughly the last five years, any advertiser familiar with the lure of marketing their products and services on a fixed CPA or CPL model has dutifully accepted the inherent risks and the "unknown factor." The unknown factor is the mysterious details on what sites and where within the site your ad will be placed. Up until now, most advertisers clearly understood that in exchange for no upfront media risk, they were giving up the right to control media distribution. Fair trade, right?

Here's the problem. We all hope to rid ourselves forever from rogue CPA/CPL affiliates. But, and there is a but: The overwhelming majority of advertisers that really want to leverage this channel are doing so because they need an extremely scalable lead channel. In these cases, lead volume will come from the high-volume producing CPL/CPA networks (Permission Data, ValueClick, Co-Reg Media, etc.). It is an impossibility that advertisers will really ever know the identity of the lead source from the hundreds of non-branded Web sites that make up these networks and at the same time be able to deliver the very thing that advertisers in this game seek: volume.

There is also the potential for missed opportunities for advertiser. As an agency, we are sometimes surprised by the lead sources that actually convert for particular advertisers and offers. One great example: After three years of optimizing and testing a home security lead generation campaign, a network with promotional paths including free TVs or laptops used as an incentive drove the best LTV for this particular client. If we were narrow-minded, pre-selected publishers, we would  never have have tested this placement. In the end, the client would have missed a strong and scalable acquisition opportunity.

The rules of sound direct marketing still apply and don't change with this new transparency model. If you are an advertiser and you choose to utilize the CPL or CPA marketplace to support your new customer acquisition efforts online, you still need to adhere to the same rules you did before, whether you know the lead source or not. Ask the same questions:

 

  • What is the lifetime value of the customer or lead acquired?
  • Is my backend system set up to provide real-time lead disposition reporting, either internally or to publishers?
  • As a company, do I know the success metrics and economics threshold for a good lead?
  • Am I in a position to follow up on leads when delivered, and have an understanding of the true consumer behavior of that lead from a particular source?

     

    If you are working with a reputable partner and have been answering these questions, it becomes less relevant if you are tracking Publisher 123 (by a unique source code) or http://www.publisher123.com. The name of the game is the same. Make sure you are driving quality leads that are converting into profitable long-term customers for your business, regardless of the publisher source. 

  • 2 comments about "Does Transparency In A CPL World Really Solve All Our Problems?".
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    1. David Dowhan from TruSignal, February 5, 2009 at 11:52 a.m.

      Angie - nice article. As you indicated, the CPL/CPA model does not change the fundamental rules of direct marketing. While the performance model has shifted the lead buyers' risk from response to sales conversion, no amount of transparency is going to "solve" the need to constantly monitor and manage lead quality.

      Even if you had complete transparency (i.e. you DO know the identity of the 300+ SUB-affiliates that make up an average, mature CPA network), how are you going to stay on top of all of them? Seems like when you shut down a rogue affiliate, they pop up somewhere else using a different name or affiliate ID code. Moreover, a single sub-affiliate may deliver only 40 or so leads in a given month. That is usually not a large enough sample to get a statistically significant read on the lead quality. Then there is the sales cycle issue. In some vertical markets, it can take 3 months or more to close a lead. All of this can add up to a significant amount of wasted marketing dollars.

      The only way that we have found to solve the transparency problem is with a lead quality score. A good lead quality score will rate the probability that a given lead will result in a sale. The score allows marketers to measure the lead quality of each and every lead IN REAL TIME. Lead scoring is a very effective tool to measure and track quality across a vast CPA network. As an added benefit, the lead score helps your CPA marketplace vendor partners to police their sub-affiliate quality as well. Bottom line: lead quality scoring has enabled our clients to completely shut down rogue affiliates and significantly lower their cost/sale...all while growing their business.

      There is no silver bullet (at least not yet). Marketers still need to apply best practices of direct marketing to be successful. Lead Scoring is another important tool in the arsenal that can give you the real time data you need to optimize your efforts.

      David Dowhan
      SVP, Online Markets
      eBureau, Inc.

    2. Craig Swerdloff from LeadSpend, Inc., February 6, 2009 at 11:29 a.m.

      Hi Angie,

      Your argument that transparency in a CPL world does not solve all our problems is like suggesting that buying toxic assets from the banks will solve the economic crisis. Creating transparency is a single battle in a long war against wasteful spending, and illegitimate lead suppliers getting rich while tarnishing the reputation of the Online Lead Generation industry. Transparency is no less important than the sound rules of Direct Marketing. In fact, you can't have one without the other.

      Direct Marketing principles are based on having highly measurable results that directly correlate to the media source and money spent. A lack of transparency is exactly what prevents Online Lead Generation from being considered a classic Direct Marketing channel. Marketers are missing a critical component of the ROI equation; exactly where there ad was seen and how the lead was generated.

      Transparency in the lead generation process is also preventing true scale in Online Lead Generation. Although you suggest that the two cannot co-exist, I believe that transparency will allow marketers to better differentiate between lead suppliers. Rewarding better quality leads with a higher CPL, allows the supplier to appropriate more inventory to the campaign, which means more high quality leads are generated. Transparency leads to scalability.

      So I applaud the next generation companies that are building transparent exchanges and offering lead validation and scoring. Now has never been a better time for marketers and agencies to embrace them.

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