At Pontiflex, we think the answer to that question is very little. So last week at ad:tech, instead of hosting a typical display booth and giving away T-shirts, we chose to instead donate what money we would traditionally spend on marketing collateral to the ASPCA in the form of a cost-per-lead (CPL) advertising campaign.

The campaign, which was launched at the Pontiflex booth at ad:tech, will provide the ASPCA with 5,000-10,000 new, transparent marketing leads — consumers who have opted-in to being contacted specifically by the organization — that the ASPCA can engage through various marketing strategies. This particular campaign is pro bono, but if the ASPCA were buying these leads, they would be paying only for information from consumers who have actively opted-in, not for clicks or impressions.

For ad:tech, CPL not only took the waste out of our marketing budget, but it is also providing increased value to the ASPCA –- instead of a one-time monetary donation, the leads the organization will acquire could potentially turn into donors and activists for years to come.

Several large brands have recently launched CPL campaigns like this one to support various online advertising efforts. Here’s a look into how CPL increases performance for brand marketers and helps eliminate the waste in their advertising spend.

CPL Campaigns on the Rise

The last two years have seen rapid growth in performance advertising as both brand and direct-response marketers attempt to prove higher ROI in online campaigns.

CPL advertising is a growing tactic for building a robust, relevant email or direct mail list, because with CPL, marketers pay only for brand-specific marketing leads instead of clicks that might never convert. The Pontiflex CPL Report estimates that the average cost of a lead is 60 cents a lead. According to the Direct Marketing Association, email generates an ROI of $43.58.

In recent years, there has been a growth in engagement marketing as brand advertisers try to leverage Facebook, Twitter and other vehicles. Marketers like Disney, Graco and Kimberly-Clark are using CPL to connect with the right user in a timely way. Once they acquire the contact information of people interested in their products (leads), they engage them through a variety of vehicles such as newsletters, community sites, social networking groups, etc.

Research from the IAB shows that approximately 58% of 2009 second quarter revenues were priced on a performance basis -– up from the 54% reported in the second quarter of 2008. As advertisers continue to reach for higher ROI, these numbers are expected to rise.

How CPL Works

CPL advertising is similar to running banner or search campaigns. Just as they would for a display banner campaign, advertisers select publishers for CPL campaigns based on factors such as demographic composition, ability of the site to deliver leads (directly correlated to impressions) or contextual relevance. Then they run ads on these sites. Consumers sign up for the ads, and the advertiser gets a lead. It’s that simple.

For the ASPCA campaign, ads ran on sites in which audiences were more likely to convert to ASPCA donors. For the campaign launch, the following sites were selected: Planningfamily.com, North American Media Group and PetPlace.com (plans are in place to go live on PetPlace). As with any online campaign, publishers will be added and removed to the campaign as it is optimized.

Once advertisers have access to the leads, they engage them in a variety of ways. The Barack Obama presidential campaign built an e-newsletter list. Kimberly-Clark engaged moms through an “Enjoy the Ride” loyalty program. Interactive advertising agency Leapfrog Interactive engaged acquired users through a community site.

Performance advertising enables advertisers to connect with the right kind of consumer -– consumers that are interested in their brand in a cost effective way. Then, they can engage consumers in a meaningful way and bridge the gap between ROI and branding campaigns.

CPL Extends the Reach of a Search Campaign

The price of the contact information of an interested person who has raised her/his hand and said “tell me more” is dependent on the information an advertiser wants to collect. The greater the amount of information, the higher is the cost of the lead.

The ASPCA decided to collect the basic contact information of a consumer -– first name, last name and email address –- which typically costs $0.75/lead. In comparison, according to a Google keyword tool, the average click for “animal cruelty” is $0.93-$1.25. That’s just for a click – not an actual sign-up.

Search advertising is great for capturing interested users. But CPL helps broaden the reach of an online advertising campaign. For example, the ASPCA can use this basic contact information to build a relationship with the consumer at multiple touch points – email, social networks, etc. If needed, they can collect more information by deploying relevant communications over a period of time. As in the offline world, online relationships are built on trust, and communicating with leads often and with relevant information helps build trust and can increase purchase intent.

CPL: Change Marketers Are Believing In

Many marketers are hesitant to use CPL campaigns because they think lead-gen lists are frequently resold to other advertisers. Before 2008, the CPL market suffered from a variety of problems largely having to do with the lack of transparency for both the advertiser and the consumer. However, over the last two years, transparency became a reality in the CPL market.

Over the last year, spurred on by increased transparency, cost-per-lead advertising has seen rapid adoption by marketers across a wide spectrum of industry sectors, such as: The 2008 Barack Obama presidential campaign, Kimberly-Clark, Blockbuster, Coldwater Creek, UNICEF and agencies like Universal McCann and RUF.

These supporters show that CPL can be a valuable tool in a marketer’s chest for proving ROI, establishing an active user base and engaging with consumers who are interested in your brand.

Leave alone advertisements for the powerful BMW M3, even the environmentally friendly BMW Mini Cooper (44.2 mpg) takes great pains to proclaim its speed (0-60 in 8.5 seconds) for fear of losing out in this performance driven age. The spirit of the Olympics is no longer a torch that we light every four years – the quest for better performance is an aspiration that we lug around in our backpacks all the time.

Why should it be different in the world of online advertising? Why can’t our executive teams and clients expect better performance from our branding campaigns? Why should branding campaigns be insulated from the demand for better performance and higher ROI?

Luckily for online marketers, the Internet has recast the relationship between branding and ROI campaigns. No longer are they at odds with each other. With the emergence of performance advertising and engagement marketing, they can converge at a junction of symbiosis. Brand marketers can enhance important metrics like awareness, recall and recognition and be able to achieve ROI at the same time.

For this to occur, there needs to a fundamental shift in online marketing strategies. Brand marketers need to ring out the old and ring in the new. No longer can branding campaigns rely on the traditional “broadcasting” approach, where the advertiser message is sent out to an audience – be it through TV, radio, or an online banner.

Instead, branding needs to take on a more active approach, where brand marketers connect with interested consumers cost-effectively and engage them in relevant ways. This calls for a three phased approach:

Acquire consumers cost-effectively: Advertisers can grow their in-house databases by using advertising purchased through CPM, CPC and CPL pricing models.

The industry is already moving away from CPM advertising. The most recent IAB PWC advertising report showed that performance advertising accounted for as much as 57% of the overall online advertising spend. This is consistent with the overall evolution of online advertising, which can be narrated as a tale of a quest for higher ROI.

Just like in the last recession saw the growth of CPC advertising at the expense of CPM advertising, the current downturn is seeing the emergence of CPL advertising. Advertisers from a diverse spectrum of industry sectors like Kimberly Clark, UNICEF, Gold’s Gym and Coldwater Creek are using transparent CPL advertising to acquire consumers that are interested in their brand.

“The industry is moving towards CPL advertising,” says Daniel Taylor, senior analyst in Yankee Group’s Consumer Research group. “CPC pricing models are placeholders for CPL advertising,” he says. “Advertisers only want to pay for very specific consumer interactions, and not for wasted clicks or impressions.”

Engage by email: After acquiring qualified consumers in a cost-effective way, the next step is to engage consumers by email to keep the conversation going.

Through email, advertisers can communicate with consumers relevantly. This in turn makes a positive impact on branding metrics. What’s more, email is also good for ROI. Noted direct marketing expert Stan Rapp estimated that the average lifetime value of an email address to a marketer is as much as $118. Re-affirming this estimate, in a recent study released by Datran Media, 80.4% of executives said that email marketing (to an in-house list) was the best performing vehicle in terms of delivering the highest ROI.

Brand in meaningful and relevant ways: The last step is to drive people to relevant destinations. The 2008 Obama Presidential campaign directed users to a variety of information rich assets: Podcasts, Youtube videos, donation pages mobile websites and many others. Other successful engagement vehicles include the Dell Ideastorm community site, the JetBlue Twitter forum or the Kimberly-Clark pregnancy countdown widget.

Through these forums, the advertiser stays in control of the branding message. What’s more they enable more relevant communications between the advertiser and consumer – which helps drive branding metrics like awareness, recognition and recall.

In the age of performance, branding campaigns have just joined the party. By deriving ROI from their branding campaigns, advertisers will clearly be able to demonstrate to their executive teams how marketing moves the business needle.

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One morning, as I walked towards the conference room, I saw our media planner buried nose deep in figures pouring forth from the monitor and the giant SRDS handbook open in front of her. On the other side of the aisle, I saw our Creative Director, feet on the desk, staring blankly out of the window.

The Creative Director, I remember thinking to myself, sure has a sweet job. The entire world that lay outside could be used as a canvass for her brand palette. On the other hand, the role of the media planner full of figures and numbers seemed so mechanized and boxed into a little cubicle with very little room for creativity.

How the times have changed!

Now, it seems that the options available to the media community to be creative with their marketing plans are limited only by their imaginations. This is undoubtedly the direct result of the proliferation of custom interactive venues over the last few years. An increasing number of media professionals and marketers are using community sites, newsletters, reward programs, blogs and micro-blogs to interact with the end consumers in relevant ways that reinforce the brand value proposition.

The market intelligence numbers bear testament to this shift from “announcement-oriented” push strategies to “engagement-oriented” pull ones.

According to Advertising Age and TNS Media Intelligence, the top 25 companies with the largest advertising spend over the last five years cut their spending last year in traditional media by about $767 million in 2007. They moved their dollars towards more unconventional or “non-traditional” forms. To give just one example, in the 2003 -2006 time frame, Nike increased its “non-traditional” media ad spending by as much 33 percent, to $457.9 million, according to Advertising Age data.

Take a look at how JetBlue has engaged consumers with its Twitter Forum, or how Threadless.com frequently makes its site more useful to end users based on continual feedback from its e-newsletters. In all of these cases it is the media plan that has infused creativity into the brand marketing effort by enabling users to express their individuality and interact with the brand in relevant ways.

So what is the defining characteristic of the 2008 media plan? How is it different from the media plans of yore?

Here are three key areas where the 2008 media plan differs from the 2007 one:

• Media planning: The 2008 media plan does not focus on demographics. It places a high premium on intent – be it the intent to sign-up for a newsletter, intent to visit the site again, or intent to buy a product or service. It does this by incorporating elements that encourage interactions with the brand at multiple touchpoints and facilitating mechanisms for an ongoing dialogue with end consumers.

• Media Buying: CPM pricing models are relics of an older, print and broadcasting era. Interactive advertisers with compelling tactical executions frequently find themselves shortchanged by pay for view models.

It’s no wonder that the Wall Street Journal reported earlier this month that gap between CPM pricing models and search advertising are steadily increasing. In fact, the article says that the spend on search advertising in 2008 is estimated to be twice as much as display. In another report, IDC estimates that with 71% YTY growth, CPL advertising is the fastest growing segment. The writing is clear on the wall – a growing number of advertisers are utilizing pay-for-performance models to build a pipeline of unique, brand-specific marketing leads cost-effectively to build out a wide variety of interactive venues.

• Campaign Optimization: The 2008 media plan will not be optimized on the basis of metrics like click-through rates and CPM. Rather, the 2008 plan places a great emphasis on marketing metrics that can be closely tied in to business results. These include newsletter open-rates, cost/registration, cost/repeat visit, cost/conversion and cost/sale. Advertisers can co-relate marketing metrics and business results more easily, which is critical, especially in tough economic times.

The media plan of 2008 is more accountable. It’s more effective. And it allows ample room for creativity. So the next time I am at an agency, and see a person with a thoughtful, far-away stare, looking out of the window, I won’t be quick to assume that she or he is a Creative Director. For she or he could very well be a media planner, with the world for a canvas, putting together the media plan of 2008.

But all is not gloom and doom. Many Fortune 500 and SMB marketers are maintaining, even increasing their advertising budgets by implementing new economic measures for new economic times.

What’s at the heart of the new strategy for these brand marketers?

In one word, “Engagement.”

No longer do brand marketers have the luxury of deploying “big bang” campaigns with heavy TV and print schedules to boost awareness, favorability and other branding metrics.

For one, by themselves, these methods are not cost-effective. In addition,  they are not in tune with the times.

It might be sound clichéd, but the Internet has democratized our society. Every industry segment has been profoundly affected by the ability for people to express their personalities through their likes, dislikes and preferences.

You can’t escape it. I saw an excellent documentary Helvetica, in which  an eminent design critic Rick Poyner points to the proliferation of social-networking websites as examples of where people “are using graphic design to express their individuality,” and how this will drive changes in the way new fonts will come into being.

If obscure industries like typesetting  can see and react to the winds of change, then surely online marketers driving this change can reinvent ourselves in keeping with the times.  We need to move from an “announcement” focused strategy to one that enables us to talk to our consumers at multiple touchpoints in a way that is relevant and meaningful to them. 

This shift is already taking place. A large number of companies like Nike are moving dollars away from traditional media. Instead, they are building vehicles like community sites and newsletters (such as  nikeplus.com) that allow them to engage their consumers in a genuine two way conversation. The Starbucks Idea site and the Mercedes community forums are just a few more examples of marketers gaining real-time feedback from their consumers to drive meaningful change to their brands.

In an article in the New York Times, called “The New Advertising Outlet: Your Life”, Trevor Edwards, Nike’s corporate vice president for global brand and category management says of the Nike Plus Community Site “It’s a very different way to connect with consumers,” says. “People are coming into it on average three times a week. So we’re not having to go to them.”

Nike is not alone.

According to Advertising Age and TNS Media Intelligence, the top 25 companies with the largest advertising spend over the last five years cut their spending last year in traditional media by about $767 million.

Given that newsletters, community sites and the like offer brand marketers the opportunity to engage consumers in a meaningful way, the challenge is to build a pipeline of qualified members for these vehicles cost-effectively.

Many of our clients are using transparent CPL advertising for this purpose. With falling click-through rates and increasing keyword costs, CPM and CPC pricing models are not cost-effective for building a large pipeline of qualified leads. Transparent CPL advertising enables brand marketers to map leads to their sources and build and segment a pipeline of qualified consumers quickly.

There is yet another advantage to be gained by moving away from traditional media.

To gauge the success of their programs, brand marketers can now measure the effectiveness of their engagement vehicles in terms of metrics like newsletter open rates, bounce rates, click-through rates and sales. They can tie in their marketing metrics to business results more directly, i.e. they can operate more like direct marketers. Which is a good thing. A result focused mindset helps them drive and prove ROI in tough economic times.

Sure, the tough economic times have taken a bite out of traditional media budgets. But it was about time. As an industry, we can utilize these tough economic times to set practices in place that truly harness the power of the Internet to engage consumers in a relevant way and deliver real value to our clients.

The mission wouldn’t be an easy one. It would take him through the crumbling ruins of failed campaigns littered with the victims of ever falling click-through rates and increasingly expensive search keywords. Indy would find that when it comes to delivering returns, online advertising has largely failed to live up to its promise.

Take the poster child of online advertising– the banner ad. Over the last few years, click-through rates on banners have dropped from 0.50% to plumb the depths of the 0.05% – 0.10% range. Even if one factors in the so called “view-through” conversions, it is clear that this method is ridiculously cost inefficient.

It’s no wonder that so many advertisers find traditional banner-landing page campaigns to be wasteful. 

Even publishers have suffered at the hands of the non-performing banner. A Pub-matic study published last month found that the prices paid for online ads bought through ad networks dropped 23 percent from March to April 2008.

These falling returns for both publishers and advertisers can help explain why a recent IBM research study found that two-thirds of senior marketers expect 20 percent of ad revenue to move away from impression-based sales, in favor of action-based models within three years.

It also helps explain why 2007 saw a paradigm shift for the industry, with spending on performance based pricing models exceed that on display (IAB PWC 2007 Internet Spending Report).

“So what’s the problem?”  Indy would have asked. “Surely advertisers can leverage these performance based models to increase their ROI?”

That’s what we all thought. By enabling advertisers to pay only for clicks and not impressions, search engine marketing would allow marketers to generate increased returns and make this economic downturn different from the last, banner-filled one.

Sadly, this has not happened. Sure, search engine marketing has been a definite step-up from online banner advertising in terms of increasing ROI, but the returns have not been nearly enough.

To put it simply, due to increased competition, search keywords have become very expensive. A 2007 Doubleclick Performics Search trends Report shows that there were nearly six times as many keywords with a cost per click (CPC) of more than $1 in January of 2007 than the prior year. The cost per keyword increased by 33% and the cost per click rose by as much as 55%.

And to really rub it in, a substantial portion of the clicks were the direct result of fraud. According to Click Forensics, the overall click fraud rate for the pay-per-click (PPC) industry was up 15% over 2006 levels.

With online banner advertising less responsive than the DMV on a bad day, and search engine marketing producing increasingly diminishing returns, what is the online marketer to do?

We should do what Indy would have done. Cut to the chase.

Marketers need quality leads to build responsive e-newsletter lists, member loyalty programs, direct-marketing efforts or for their sales force. This is why so many banner and search campaigns are deployed for the purpose of lead generation.

When marketers generate leads through banner and search campaigns, they spend hours poring through spreadsheets to calculate their Cost-per-Lead metric.
Why then can’t they pay on a Cost-per Lead pricing model to begin with?
Clicks and impressions would become irrelevant. Marketers would pay only for interested consumers. They could devote their time to engage these interested consumers and drive business. Seems simple enough.

What then is standing between now and this return-filled utopia?

Till now, the finger could be pointed at a lack of transparency in the online lead generation market, a failing that prevented advertisers from generating brand-specific leads efficiently.

It’s important to make a distinction here. I’m not talking about sales leads. The market for sales leads – leads that are generated on the basis of demographic criteria and sold to multiple advertisers-is fairly mature.

I’m talking about marketing leads – brand specific leads- generated for a particular offer. Think of a company like Coca Cola or an airline like Southwest looking to sign people for their newsletter or member loyalty program. They would want leads that have signed up specifically for their offer. They would want to be able to optimize campaigns by mapping leads to their sources.

Until recently, due to a lack of transparency, they couldn’t even have insight into where their offers were running. Hence they found it impossible to generate marketing leads on a CPL pricing model.

But in a manner that would make Adam Smith proud, the market has responded to the advertiser demand for increased returns. Transparency is now a reality in the online lead generation market.

As a result, instead of having to run inefficient banner or search campaigns, advertisers can deploy cost-effective marketing lead campaigns on CPL pricing models.

New times call for new measures. I don’t know if Indiana Jones said that. But if he were an online marketer in 2008, he surely would have.