Features

Will CPA Stamp Out CPM? Industry Pros Argue Why Per Action Makes a Better Impression

Written on
Aug 28, 2006 
Author
Kiran Aditham  |

It all began with a healthy debate on IM regarding one of the online ad industry’s most consistent quandaries. Only this time around, the dialogue was punctuated with the statement, “CPA will dominate metrics in 2010, brand advertising will die out.” Was this a new twist to the tale, or something that CPA proponents have been insisting on all along?

2010 seems to be the magic year to which this industry clings when it comes to assessing its future success. But while we’re now used to the weekly case studies and research reports touting the boatloads of revenue set to arrive in ’10, a statement that sounds the death knell for what’s ideally been the most robust online ad model continues to spark interest.

Will CPA (Cost per Acquisition or Action, depending on your mood) kill off brand advertising/CPM in the coming years?

The persistent argument persuaded this writer to not only follow up with the source of the original comment—Joe Speiser, Co-Founder of AzoogleAds—, but pose the theory to other industry pros who sit on both sides of the fence.

True, opinions can often be laced with doses of hyperbole, but Speiser’s rhetoric, all bias aside, seems to carry some logic. With provinciality reigning in the old guard, which views the CPM metric as industry-standard, Speiser—though softening his initial IM commentary—remains adamant that the paradigm shift is inevitable. “I don’t think CPM will ever disappear entirely,” he admits, “but I do think that within less than 10 years, there will be a very significant shift of the top media buyers from the older minded CPM metric to the relatively new, but safer CPA.”

Speiser recalls the moment when CPA began to take off, emerging from the ashes of the bust with the hopes of infusing a more results-driven model. “CPA really started to take off right after the bust of 2000, and it was in that year accountability became a focus,” he says. “Advertisers and agencies couldn’t afford to spend on a CPM any longer without guaranteed results. Shareholders were clamoring for a cut back on excessive media spending with the hope of an ROI sometime in the next X years. This forced buyers to look for an alternative.”

Speiser views present-day CPA still as anything but static. “These days, while CPA has been in the shadow of CPM and CPC, it hasn’t been standing still. There have been huge advancements of measurement, and creative optimization that places many CPA campaigns on par if not above the average CPM rates.”

Considering that a CPA model plays an important role within the AzoogleAds network, Speiser’s observations can be construed as partial. But there obviously has to be valid reasons why AzoogleAds and its leadership prefer per-action over impression, and it could be proven in their growing client base and campaign metrics.

But is CPM truly destined for greener pastures, or does it still have a place within the current context of interactive advertising?





Kiran Aditham
Managing Editor
Kiran Aditham is a Business Management grad from the University of Central Florida, Aditham earned his stripes as a freelance writer in music/arts publishing.

Reader Comments.

Here at HydraMedia we’d love to be able to believe this, as one of the significant distributors of CPA advertising…but gentlemen, it seems that this “CPA replaces CPM” stuff is naught but uninformed fantasy, perhaps driven by the egocentric wanna-be superiority with which the youth of our industry are often characterized. ;)

One not need look further than the IAB for the straight scoop:

“Approximately 41 percent of 2005 fourth-quarter revenues were priced on a performance basis (e.g., cost-per-click, sale, lead or straight revenue share), down from 46 percent for the same quarter in 2004.”

I’m not saying everyone in our space should brace themselves, but we should know exactly where we stand in the race to enhance our chances of winning.

Posted by Adam Walker | 2:23 pm on August 28, 2006.

The truth is CPM or CPC will never die, but probably get stronger. The only party that really wins in CPA is the advertiser. The publisher keeps on sending free traffic to the advertiser until an action is completed. If cookies are erased, which usually are on a daily basis, there is no record of the transaction and the affiliate or publisher is left holding the bag with nothing to show for it. It is very easy for a network to just offer CPA deals. There is no real incentive or risk for the advertiser, and the network gets the new advertiser to use in their promos.

The truth of the matter is AZoogleads has tried CPM in the past and failed big time. Anyone remember Bluetime? This is probably why Joe is trying to push his weight around and promoting CPA. Big league publishers will not stand for it and neither should small ones. If you can get a CPC or CPM from a network, what is the incentive in running a CPA campaign? None. There is no median between the advertiser and the publisher in CPA. While, CPM can be more in favor of the publisher, CPC is somewhere in the middle.

Posted by Josie | 2:39 pm on August 28, 2006.

Are we ignoring the fact that BRANDING can not always back into a ROI?

Posted by Andrew | 2:48 pm on August 28, 2006.

I prefer cost per conversion or, rather “performance” ie., you pay when someobody actually buys something; an idea, not incidentally, that comes from Bill Gross. And it’s a very good idea, but not the best implementation of the idea.

The best implementation of the model, which is to say a model that actually takes advantage of Web connectivity, and its corollary which is its proclivity for having a disruptive effect on other, older business methods, is what I call the “BNPN Plan”.

Never heard of the BNPN plan? Not to worry!It’s coming soon to a local ad agency and really ought to be quite popular among the creatives because it takes Mr. Gross’s idea one step further.

The acronym “BNPN” means “buy now, pay never”, which is an idea that uses the Web as a tool for connectivity, rather than monopoly, or deep pockets.

Think it can’t happen? Au contraire! And, no, brands are not dead. They are simply going the find their rightful and more appropriate place on the public Internet, which is to say inside “brand channels”,
where “value” and “utility” and, indeed, “creativity” actually means something, because all of them help separate the chaff from the wheat inside the brand channels, rather than who has the deepest pay-for-placement pockets.

“Buy now, pay never”? Exactly! Advertiser pays once only, per ad, per placement, inside a brand channel. Change your ad, or maybe your prices, say, for today only?

No problem! Click fraud? Means nothing! Your competitors can click ’till hell freezes over. The entity that pays for the ad does so once only and that’s the end of it ’till client decides to change the ad.

This way, its the connectivity that counts. And the sale, Not the number of clicks or whether deep pockets “a” had more money than deep pockets “b”.

When “connectivity”, which is to say “performance” actually happens – then advertiser knows it got its money’s worth. Every time!

I daresay that Mr. John Wanamaker would surely be enthusiastic about such a model.

Derick Harris
Cyber ID
Volcano, Hawaii

Posted by Derick Harris | 2:55 pm on August 28, 2006.

This debate is as old and fruitless as the motivations behind those who fuel it. Joe’s a bright man as are many of the other emperors of CPA and lead generation, but hardly impartial :)

One day our industry will evolve like all other mature industries and not define it’s product offering by price types. Can you imagine, FORD, MICROSOFT, Bed Bath and Beyond, COKE, etc. defining their business prospects around price type, simply ridiculous. It’s a pricing method, not a model or product.

Bottomline, advertisers who can measure some performance trigger, absolutely will buy as much inventory as they can via every price model that achieves whichever target they have. Price type is irrelevant, YIELD is what matters. advertisers who cannot measure performance will buy based on strategic value according to whatever price type fits. Do you really think a yield based advertiser won’t buy a top brand site on cpm to test just because they won’t offer CPA, hardly.

Yield is the holy grail folks, not price type. And for those who consider yield only a measure of ROI, think again because yield will eventually be incorporated into the thinking of such concepts as brand lift. Every action has a value, only a matter of defining it for potential achievement.

This debate is a reflection that we’re on our way there.

Robert Regular
President
Oridian, Inc.

Posted by Bob | 5:05 pm on August 28, 2006.

Speaking from the television side of the CPA model, I’m enjoying the conversation! I’m sure you’re all aware that television CPM revolves around an audience sampling methodology developed by Nielsen. It works great when you are sampling large networks but becomes challenged as media and audiences become very fragmented. Multicasting on the digital broadcast tier should be fully implimented by the end of the decade. Talk about fragmentation! Point being, the advantages of CPA, with respect to television, become even more intriguing when one factors in these types of challenges. Will CPA one day become more of a standard on television too? We believe so but the metrics will most likely be blended with data coming from sources like Nielsen and others. We believe that television advertisers will ultimately be able to execute CPA buys across menus of different demographic targeted programming segments representing the diversity that exists across today’s multi-channel television universe. We view CPA as simply another way to execute the DRTV model and one that we feel ultimately will be more efficient for both advertisers and media. Like any other model, it’s a bid environment based on yield measurement. It’s also an environment that can be largely automated which is critical when one considers the overhead associated with managing traditional DRTV campaigns in a challenging fragmented media universe. It is all about yield management as campaigns generating more yield to the media must achieve greater exposure while lesser yielding campaigns should see less explosure. Hey, isn’t that just like how the DRTV model works today? It’s called media pre-emption.

CPA is really just another tool for how media can be packaged and sold in a changing world where traditional models are running up against practical limitations. It’s nice to see people thinking outside of the box and discussing CPA.

Regards,
Joseph A. Gray
CEO
REVShare
http://www.revshare.com
Do you REVShare?

Posted by Joseph Gray | 9:09 pm on August 28, 2006.

Leave a Comment

Add a comment

Tags: , , , , , , and
Article Sponsor

More Features