The 24/7 Real Media sales exec describes the pitfalls of this revenue model for both publishers and advertisers.
There are strategic ways for online advertisers to buy media. There are measured ways to work with publishers to generate ROI. There are established ways to place online media advantageously. All of these ways are well-understood, and not one of them should be based on a CPA model.
No penalty for failure + no reward for success = mediocrity for the advertiser
However successful a CPA campaign is in terms of the actions it generates, its ROI for the advertiser will never vary, because each sale/action will inevitably have a fixed cost. What would Wall Street -- which routinely slams companies that achieve their stated goals but fail to better them -- make of an approach which guaranteed that a goal would a) be meaningless, b) always be met and c) never be surpassed?
There are better ways to advertise
I can tell you from my own experience that far more online consumers take action after they have seen an ad -- often long after -- than when they first see or click on it. I have also seen evidence that banner ads drive search sales, and that search and display campaigns do better when run together.
There is no question at all that strong, long-term campaigns with high quality offers and varied promotional elements -- campaigns that use all of a site’s opportunities for media placement over a period of months or even years -- are the best way to go. They generally yield far better results for advertisers than do short-term CPA campaigns that, by their very nature, are ill-suited to be part of a broader advertising strategy.
No fun for publishers
CPA deals have a plethora of limitations for advertisers, but are just plain bad for publishers. Publishers who accept them assume virtually all the risk and typically sacrifice all control. The advertiser manages the creative, the offer and the overall shape of the campaign, while the publisher risks non-payment if the campaign generates no actions. Is this justified when the publisher’s inventory/audience (assuming that it performs well for most advertisers) is only one element in a process over which it otherwise has little or no control?
Sometimes it's inevitable
What if you’re a publisher operating a CPA model? Here are your two options, with the best one first:
- STOP!
- Gain as much control as you can, or at least become a strong influence over the process (which is no easy task, admittedly).
For a CPA campaign to work, it must be designed to elicit the agreed action through the ads that are actually served on the site (and not through other elements of the campaign). The invaluable data and expertise that a publisher acquires as it builds and grows its user base are ignored by most CPA campaigns. They should not be. They can generate impressive results for a CPA advertiser. The only condition to this is that the publisher must know what the advertiser is trying to accomplish, and its advice on ways to build and optimize the campaign must be heeded. The more control the publisher has, the greater the likelihood that this will happen, and that the campaign will be a success for both parties.
Getting the campaign right is one thing. Setting the right price for the action itself is another. In doing this, publishers need to consider a whole host of factors-- such as whether the response will be impulse-driven or considered, the cost of the product or service being advertised, the likely audience interest, the call to action and the ease of taking the action.
Don't do it if you can help it
Much of the time, unfortunately, a publisher that tries to enlist the efforts of an advertiser in improving a CPA campaign is going to be frustrated. The result will be exposure to the risk of an underperforming campaign in which inventory is depleted with no returns. This is reason enough for publishers to be wary. But if you're an advertiser running a CPA campaign, take a close look. Does the campaign really hold out the promise of growth?
Believe me, you can almost certainly do better.
Ari Bluman is senior vice president of U.S. sales and operations at 24/7 Real Media.