Online ad payment models that make real sense

Everybody's talking about results and the inherent 'measurability' of online advertising campaigns. Does all this buzz mean that pricing models with no risk, such as cost-per-action, are the way to go? With cost-per-acquisition (CPA) and cost-per-lead (CPL) models, you pay for exactly what you get and not a cent more. You cannot argue with the risk -- there simply is none. However, think about some of the indirect benefits of advertising that perhaps are lost in our quest for the ultimate results payment model. Are they really the only models that pay off? Intelligent online advertising campaigns can lead to new venues of distribution and sales. Sometimes it pays to take the risk to achieve better overall profitability. So is there an ideal payment model for online advertisements? Opportunities lost, opportunities gained
To answer this question, let's examine an example of a 'plain and simple' results approach to selling 100-gram Belgian chocolate truffle gift packages to consumers conveniently over the internet. The target price per package is $25. By placing a standard CPA campaign, 100 packages were sold. At a known advertising cost per sale, the vendor pays $2500 and achieves a fixed return on investment. On the surface, the result-based CPA/CPL model seems ideal, but is it really? Let's answer that question with another, more difficult question: what else could he have gained? Focused on the results
According to the result-based online advertising approach, the focus needs to be on the benefit and results of the campaign. But this does not mean that the approach needs to rely solely on payment per result advertising models. Why would an advertiser consider riskier models that may not yield results? The risk has to be worth it. Payment models such as cost-per-mile (CPM), cost-per-click (CPC) and cost-per-view (CPV) might in fact deliver many benefits and opportunities that the risk-free models do not. Some payment models that carry risks may generate a positive ROI and lead to better campaign results and returns. What are some of these benefits? Higher than 100 per cent ROI
These riskier models enable you to optimise the media in ways that deliver positive results and lower costs. It is possible to reach the campaign's goal and even to reduce our eCPA (effective CPA) by using CPM/CPC models where the cost-per-acquisition is not fixed. These riskier models may, in fact, help increase margins to over 100 per cent, proving the risk very worthwhile. On the other hand, risk-free models do promise a margin, but this margin is fixed. At the end, it will be possible for our Belgian chocolate truffle vendor to reduce its CPA, for example to $20 instead of $25 (as he is paying per impressions/clicks and not per result), paying $2,000 and not $2,500. The advantages of exposure and volume
Many sites do not accept CPA or CPL campaigns because they are unwilling to promise revenues. This limits placement exposure. A mix of riskier payment models expands exposure and allows entry into more attractive sites that hold the potential for even more results. By spending the money on a more far-reaching ad campaign, volume can be increased significantly. This in turn, can generate more opportunities, more exposure and better bottom-line results. Effective results mean business value
The point is, we need to look at the value of the results to our overall business goals. When advertisers focus on the defined results of the campaign, and if these are measured consistently and carefully at every stage of the campaign, advertisers can select the most beneficial type of payment model that delivers positive ROI and ensures cost effectiveness -- no matter which type of model we choose. This optimised, cost-effective choice can, in fact, generate more opportunities, more results, higher profits and better ROI. Inbar Chap is co-CEO of DSNR Media Group.