CPM vs CPA
July 24th, 2008 SkyHorseI’ve been recently discussing with industry friends what is going to be pricing model of the future: the publisher-friendly CPM or the advertiser-dream CPA. The industry as it stands now sees CPA as the bastard child of online advertising and many times regarded as the “dirty cheap stuff” associated with online gambling, porn and other not so desirable campaigns. Affiliate networks, of course, capitalized immensely on this perception and the fact no one else dared touch it. Advertising.com, mainly a CPA based network, is now only second to Santa in terms of reach in the UK. This means the publishers, one way or another, are also playing in to the game.
The reality is that CPA is out of the control of the publishers. It’s the network and/or the agency that owns the reporting, the data and the technology to reduce the number of impressions required for a conversion. This is the single most important reason why blue-chip publishers cannot afford to trade primarily on CPA deals as this would mean giving complete control of their value to an outside party.
But is there a shift in the market? Yes. Recently publishers have been scrambling to update their sales force and their technologies to improve their efficiency, from data analytics to yield managers, but most importantly with state of the art behavioural targeting and reporting tools such as wunderloop, Revenue Science, Rapt and Magenta. What this will create is a power shift from the agencies and networks to the publishers, if and when the technologies start to be used correctly and wisely by a refreshed sales team (yes, sometimes they do need to go back to school). When this happens then Sales Houses are doomed to die, be assimilated with big publishers or convert into specialist yield management consultants. Networks? They will become ad exchanges.
In the end CPM and CPA will cohexist in harmony as all reports will include both impressions and conversions and a new pricing model will appear: the combined CPM / CPA model where a minimum is guaranteed on both values. CPA alone will never fly as the main model for publishers because there are unmeasurable side effects, such as brand awareness and offline behaviour that has to be paid for. Unmeasurable until the tricks up some companies sleeves become reality, but that’s a whole different post altogether…
Long live media lunches!
Tags: advertising, online media, online-advertising
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