There are all sorts of doom-and-gloom stories about banner advertising and the demise of the CPM model lately. I've even heard comments that the CPC model may be shaky, and that pure CPA may soon be the only one left standing.
Funny, but I've always been under the impression that advertising worked on a CPA basis. True, there is branding, but only successful brands survive. The effort goes beyond just having your name recognized.
I remember when the Super Bowl carried its first dot-com ads, though not the actual advertisers. I also remember the GoDaddy ads after that -- hey, sex sells -- but that's because they're a viable company. The branding efforts had successful ROI. Thus, the CPA worked overall.
When Bill Gross, the creator of paid search, said he was working on developing a CPA model a few years ago, I became an evangelist. PPC problems with Google's floating minimum bids and eventual introduction of Quality Scores pushed advertisers to the limits. Many small companies were forced to abandon that source of traffic because their CPAs couldn't be done profitably.
Gross has been working on this for more than four years now. Snap was one iteration that was launched but really hasn't taken hold. His 2001 presentation shows some insights that have yet to be employed by most online publishers and marketers.
Part of the problem is that they, like him, are still looking at the Web through a narrow perspective of search. If we think in terms of what search is -- not as it exists online, but what motivates it, how it can be answered (not just by a list of sites), and what happens when it truly is delivered -- there may be an answer on where the industry is headed and how to be successful in it.
Profitable CPA is the fulcrum. People are looking for answers, and the providers of those answers are willing to pay to find them. It doesn't matter if we're talking about name recognition that promotes an offline company's health, an online store selling whatever, a publisher with information that people really want and are willing to pay for it or at least contribute through using recommended products, etc.
It's a circle, an interrelated "global village" that survives by being successful. It doesn't matter how the exchange process works, so long as it works. Search growth is slowing -- given the number of people coming online is expanding, you have to wonder if the mechanism has just reached its peak. We get places online now through so many more methods than just a search.
Publishers can use AdSense and/or become search partners of one engine or another, or they can go direct to the people who want to advertise (or should we say, monetize the audience). If the old CPM model isn't functioning any more, then use CPA. Ultimately, they're both providing the same thing.
Everyone must realize that it's all about conversion. Publishers should look at their own product and make it more successful. People "bounce" off when they come to a site that may have great content when it's too hard to find (e.g., cluttered by too many gateway pages to deeper areas of their sites). But that works for them because it means more page views, and thus more money from the CPM model.
But what if they made the discovery quicker and easier and the answers more specific? Then the CPA model would work. "Trusted" sites with tight pages of content that a person really wants get rewarded by those people listening to recommendations.
Meanwhile, the advertisers also need to be aware of this and make their calls to action specific and clear. It's easier to do this if the content where it appears is more specific.
Going forward, we may not need SEMs so much as we'll need conversion marketers. These companies can work with both sides of the equation, using multivariate testing for publishers, as well as for the landing pages of advertisers. Companies that can help write great copy will be in demand by both, because just as you use different ads to attract differently motivated people coming in on the same search term, people who may be reading one set of content may be motivated to do or want different things.
A recent story about how Digg may start running ads is interesting:
"So users would have the ability to vote on advertisements in the same way they vote on stories. The better ads, as determined by Digg users, will get more prominent placement and a lower cost-per-click."
Hopefully they take some of what I've written into consideration before launching that model. Just voting something up and down can create all sorts of fraud issues to begin with -- cronyism could have a huge impact.
Let the synergy of content and advertiser make the determination. Digg should use their knowledge and programming talent to come up with the answer to how the value meter can be balanced so both parties get the best value. Some people may pay 10 cents a conversion and get you thousands from the traffic, while another could offer $100 but make you less.
It's funny how we have all this new social media to play with that has yet to find the right monetization model. Work on that one Mr. Gross, the guys at Digg, hell even the workers at Google with that 10 or 20 percent creative time. Find an answer to working that fulcrum and you'll have the next great thing.
And my conversion shop will be ready to help all customers. I won't be a marketer; I'll be a converter!
Chris Boggs Fires Back
Frank, thanks for an excellent start to the year with a tribute to what really came to a crescendo last year: search marketing accountability. Additionally, innovation such as you describe is why search and social media could keep finding ways to win more budget.
A CPA model is very compelling to all parties involved. Understanding exactly where someone is in the buying cycle will become even more important when creating landing pages, in order to "pick up" where they may have been in the normal funnel of the Web site as described tactically above.
With content it's tough to "have it both ways," because one typically needs more actual text on a page in order to rank well organically for terms. It is sometimes difficult to determine exactly what page a visitor will come in on organically, so matching up the right call-to-action will require testing.
Creating hybrids that also focus on the sales funnel is becoming more important, as marketers and user experience professionals continue to rightfully evangelize a consistent user experience.
Here's to exceeding online conversion goals in 2009, and to better understanding the role online plays in offline conversions!
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