Pricing is the trickiest factor of them all in figuring out how the ad network (rep firm, ad network or hybrid network) operates. There are a few ways to compare pricing. They either have agreements set up with a publisher with tags in place for prime inventory, or they must go out and purchase that media once they have a deal with an advertiser; this is commonly known as arbitrage.

CPM vs. CPA (performance-based deals)
Most ad networks that will sell Clicks Per Action (CPA) deals are working on an arbitrage model. These will typically be your pure ad networks, such as Advertising.com and ValueClick. Once they have an agreement with an advertiser, they will then go out and purchase inventory, typically as cheaply as possible, to back into the ROI metrics agreed upon with the advertiser. This can be done by a pure tonnage model or by using the various targeting and optimization technologies that many of the ad networks have at their disposal.

If you have direct response goals, this is definitely a pricing model you will want to explore.

The other more typical pricing model is the CPM model. As with most ad-supported sites, an advertiser pays based on the impressions served. Most of the ad networks (all types) will operate on this premise, and you will find a lot of reach with this type of inventory.

CPA deal issues
One key thing to remember when negotiating performance-based deals is what the action definition is. And what I mean here is not only defining what the action is but when that action occurs and is counted.

Many ad networks will do the CPA deal, but only if you count view-based conversions (those that happen post-ad view, not post-click) and have an open-ended cookie window. Since many of the larger ad networks reach a very high percentage of the internet audience, the likelihood of someone visiting one of their sites and ending up on your confirmation page is pretty high, and the correlation of the ad to the action is potentially much lower.

You won’t have as much of an issue with this when working with more niche ad networks -- such as vertical networks Jumpstart Automotive Media and Travel Ad Network) -- since their reach is lower but the audience is very concentrated.

Also, remember that the lower you set the bar in terms of the actual cost you are willing to pay for a conversion will inhibit the volume you are able to drive. Be prepared to be flexible with that threshold and change it as you see the need to drive more volume.

CPM deal issues
Even with the CPM model, you need to make sure you understand what you are paying for.

Does the network have an established agreement to sell that inventory and allow you access to more premium inventory? Or will they place the buy for you once you commit dollars to them and may or maybe not be able to secure the inventory you want at the price you want?

The rep firms and hybrid ad networks will typically have concrete agreements with the publishers and allow you access to the top-tier inventory. Specifically, rep firms will almost always offer this, as they are either the sole sales force or partnered with the site to be the exclusive external sales force.