Should online publishers and medias be afraid of CPA (Cost per action) model ?
Why taking the advertising risk? Hot question since Google is testing the CPA model
Good Answers (3)
Rick M
Media Operations and Sales Executive
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The CPA model is not one with publishers will ever be happy with, unless they have a direct interest in the acquisition portion of the deal. If their sole source of revenue is the money generated by CPA, then it's always going to be a losing proposition.
Here is why:
1. Most advertising is lead generation - oriented. That is, an ad is generally designed to spread information and get consumers interested. It isn't always a matter of getting an immediate sale or purchase. So, alot of ads sold as CPA will run without generating revenue.
2. Publishers are at the mercy of the advertisers. If the advertisers have lousy products, lousy ads, or a lousy website, then getting the Action or Acquisition portion of the advertising may never occur. More ads with empty revenue potential.
3. Brand equity...even with a good CPA campaign, there is a value to building the brand. So, with the CPA model the advertiser only pays for the A (action or acquisition) but doesn't pay for all the additional benefits of advertising - spreading the information about the product, improving brand image, etc. That is all given for free by the publisher.
The solution is for the publisher to be directly linked in with the revenue generation portion of the relationship....but then this will erode the independence of many outlets that rely on advertising for revenue.
CPA can be PART of an overall revenue generation strategy by publishers, but it can't be the sole revenue source, nor should it be the primary one.
Let's take it from the customer point of view. A sophisticated online advertising customer will be measuring publishers and online media from a CPA point of view if it's looking for a lead-generation campaign. And choosing the best value for its advertising budget.
Online advertising gives him the ability to measure this marketing expense and finding out which sites, portals, networks, etc. give him the best bang for his buck. And that is how he will evaluate in the long run, no matter whether he is purchasing by CPM, CPA, or whatever other metric.
So the online publishers are already being measured through this optic by this customer -- they are already part of the customer's business; the media that will offer him a CPA model is only speaking in the same language that this customer.
Obviously this requires a change of worldwiew for online publishers. It's no longer advertising buisiness as usual.....
No, online publishers should not be afraid of CPA - UNLESS your online marketing systems suck. If you think you're going to guess what the market actually wants, you'll *probably* miss the mark. If you're willing to test toward a specific goal, to track with a specific goal, and build the systems to produce profits (if they're not already in place) given in the specific goal, you'll probably do extremely well.
If you have your current conversion ratios, you at least have a starting point. If you have your net profit or average net profit per sale calculated, a low estimate of your average lifetime value of a new client or customer calculated, and a goal, you have a much better starting point.
If you do not, you have no real starting point except to guess. Determine the basic numbers above to have something to start with and move forward from there.
The cost per action advertising model is not something to fear, it's something to get really excited about because of the new opportunities it can create for you - or else. There's nothing to fear with CPA except some study, testing and creativity, that and stupid bidding actions (hey, I've made my share!).
More Answers (9)
A very good question. The answer depends on the markets for readers and marketeers and on the position of the publisher in those markets. Cost per Action can be very useful to monetize the long tail of your contents and users that could be underestimated by agencies and yourself. So if you see through CPA campaigns that a specific section of your contents and readerships earns already significant revenue throuhg CPA it is the best situation to strengthen this part and take the CPA campaigns off.
But another thougt: what is the opposite of CPA ? Not knowing enough about your online users and selling it CPM - but with very low prices, hight rebates etc. through huge online advertising networks. This doesn't happen to special interest sites, but to all general interest sites. For those sites it is possible to gain higher ground through CPA models - and reducing costs by firing most of their own low profile sales staff or reducing fees they have to pay to their external sales network(s).
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Eli F
SEO & SEM Expert, Social Marketing Pioneer, Affiliate & Online Marketing Guru, Entrepreneur, Experienced Writer
I say: Yes, very afraid.
CPA uses too many variable that you, as a publisher, can't control. You can do everything right to your site: optimize it, bring in qualified traffic, keep it updated. But if your advertiser's site has problems or doesn't offer a compelling product, you don't get paid for your valuable advertising space no matter how many impressions or clicks the ad gets.
If you do want to accept CPA ads, go into it the same way you'd go into a business partnership. Accept ads on a one-by-one basis; if you would partner or revenue share with this site--if it's compelling enough to make you commit whatever action they are paying your site for--then it's good enough to accept on a CPA basis. If not, then no way.
Gunther S
Digital Brand Strategist | Advertising Technology Expert | adjunct teacher @ Miami Ad School
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Indeed a great question. Google's testing (among other things) has given rise to a larger issue which is tracking over multiple platforms; by default, the various channels dilute impression, retention and engagement. Recently at the 4As conference in Vegas, none of the networks signed up for the ad auction platform eBay just launched, which says a lot about the fear factor on all sides of the media equation.
Ultimately, to all the points above, CPA or CPC models will definitely have to fit within a bigger and more comprehensive strategy, one in which publishers and media agencies will need to offer or have a bigger stake in. CPMs point to brand resonance, but lack conversion. CPCs point to active enrollment, but lack longevity or even direct sales value often times. Pretty tough circumstances, and interesting to see considering all the pundits for superceding traditional media models, particularly TV.
All the more reason for media companies and publishers to embrace convergent models that utilize the best components found in traditional and new media platforms.
the advertiser want to pay for result. The one who sell expensive space withtout trust real audience need to be afraid. But those who have a good and REAL audience don't haver to be afraid. Now the content is king. And the time of liars poker with advertiser is over.
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Ryan T
"The simpler our means, the more we communicate."
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I'm with Gunther and Pierre on this.
Publishers and media have nothing to fear if they're being honest about the reach and loyalty of their audience, and not trying to cheat the system, regardless of any approach in place.
By going the CPA approach, online marketing-- especially in areas where risk and open-minds should be greatest-- can turn into a "bounty for hire" that removes the sense of personal cost and investment in the effort's success.
Other legitimate concerns:
-- brand separation (more emphasis on the ad, product, or overall brand at the expense of marketers pushing online transactions);
-- brand dilution (mishandling of the brand through disconnect in marketers);
-- prospect cannibalization (online channels and sites marketing at cross purposes with one another)
At this point, remember Google is only testing CPA against CPC models, though I suspect in the short- to mid-term they will implement both as a hedge against competing providers, and offer different tiers or packages of services. It's their best move to reach solve a combination of problems and hedge their bets in the short- to mid-range. Then they will eventually phase in one hybrid model that takes the "best" of both for them.
Think of it this way: of the following, which probably *make* more money for Google and which ones probably *cost* Google more money under a CPC scheme?:
-- small-size/high-traffic sites
-- small-size/low-traffic sites
-- large-size/high-traffic sites
-- large-size,/low-traffic sites
I'm guessing the small-size/high-traffic and large-size/low-traffic sites would the type of groups Google wants to court for a CPA program, because they'd wind up paying less than under a CPC plan while gaining enough of a base to make it worth their time, no?
Chris W
Owner at The Wireless Man
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With the majority of sites still mired in CPM I'm sure this will be a slow take-off.
I tried to get site owner who took my ads to offer CPA (cost per acquisition as it was called in 2000/2002) and I only ever worked with one of my site owners as the others couldn't get their heads around it - blaming reliance on creatives they were not involved in etc.
The problems we had in the end was not one of mechanic or agreement from the site owner or payment it was one of tracking.
So, no they shouldn't be afraid of it - but there are a lot of blocks that need to be in place to have them see it as a viable option for advertisers.
The problem with the CPA model is that it takes no notice of the quality of the source of the action.
Often (such as with certain affiliation programs) the advertiser has no control of where his brand is appearing and as such can lose brand equity due to appearing on lower quality media.
The CPA model therefore tends to benefits lower quality and less scrupulous media as they will generally take any sort of campaign in order to generate revenue through this model.
So the answer to your question is yes, quality online publishers and media should be afraid as content and quality are not often taken into consideration.
Jim M
VP, Business Development at SHORTsense, Inc.
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Some CPA (cost per click but not "cost per lead") is fine. But CPM is my preference and eventually, it’s the only thing that I will take for certain marketing campaigns. My reason for this is simple. As a publisher, I shouldn't have to insure that your advertising campaign is well thought out or properly targeted. My roll should be to provide you with as much demographic information as possible and let you decided who to target. If I think you are going to fail, I'll tell you up front. The last thing I want is for my advertisers to be unhappy.
I've actually seen some advertisers insist on running advertising campaigns that publishers have advised against because they knew the campaign wouldn't work. In those cases, CPA is out of the question.
On the other hand, I'm also a software manufacturer that has a rich-media service that works in the body of an e-mail message. I'm perfectly happy letting customers use my software on a CPA basis. My reasoning is simple. We haven't been involved in a single e-mail campaign that hasn't increased click through rates by at least 1% and we've had revenue increases as high as 38%. With numbers like those, CPA starts to look very attractive (to me that is). On the other hand, advertisers that use my tools may wish that they simply took out a software license when they receive that first bill.
Jim Malmberg
Vice President, Business Development
Virtual Iris
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Stéphane M
Author and Chief AtoZ Officer
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Bonjour Emmanuel,
CPA also means Certified Public Accountant and accountability certainly means something to announcers.
This trend goes beyond online advertising : more and more agencies are switching to remuneration models partly indexed with results from their ad campains (ie sales, brand awareness scores...).
Anyway, to me, the good old banner is already a CPA model (clicking is action).
So be not afraid.
