Have you ever wondered about how advertising networks price their media? Want to get a cost per action media deal? Read on.
When it comes to the online advertising industry, it's no secret that this
has at times been a game of shady practices, unspoken rules and aces perpetually
hidden up sleeves. This kind of behavior occurs on a multitude of tiers in this
industry, but for today let's focus on the CPA dilemma. Talk to anyone who knows
much about online advertising and you'll hear quickly that some of the bigger
networks like Fastclick, Casale Media and RightMedia are running CPA offers
without actually advertising the service. Dig around a little more and you'll
find that this is true across the board on many networks. But try to get these
networks to admit they're doing it and you often run into a brick wall.
So what gives? We know these outlets are running CPM from their media kits,
but what is it about running CPA that's so shady that it makes anyone in question
hide behind anonymity?
Most of you in the media buying world seem to see this unwritten rule-that these
companies run CPA, but nobody admits they do it-as a pretty standard practice.
In fact, the general reaction from the handful of industry insiders approached
about this topic was to excuse the prevalence of the practice by saying, ''You
gotta fill inventory.'' There's no debating that fact-but the question remains:
why not make the CPA practice known publicly? Why the veil of secrecy? And if
it's really no big deal to be running CPA rather than CPM, as some industry
professionals would have you think, then why, when challenged on the subject,
did so many network employees start cowering under their lawyers' skirts and
demanding ''anonymous'' attribution?
One of the factors a number of sources highlighted to explain this hush-hush
attitude has to do with inventory quality and assumption of risk. For networks,
running CPM is low risk activity, because results don't rely on closing a purchase,
as they do in CPA.
Therefore, the networks claim to run a majority of inventory on a CPM basis.
But the not-so-secret secret is that they're also quietly and slowly selling
off their left-over, lower quality inventory on a higher risk, CPA basis. And
according to some sources, this could very well be the model the whole industry
will be moving towards in the future.
What's driving this move towards CPA? Two words: Money, honey.
Though networks generally make more money selling on a CPM, having a ton of
left-over inventory doesn't allow them to meet their metrics-and that, in turn,
doesn't impress stock holders. But you know what does: getting a quick sale
on what one network exec called a ''flashy, in your face, epileptic inducing
creative'' (you know the kind: ''Warning your computer may have a virus!'' or
''Congratulations, You're Our Billionth Visitor!'', and more notoriously ''Shoot
the duck for a free iPod.'') Selling out most of your inventory, no matter how
you did it, looks a heck of a lot better in the short term than not selling
it at all.
But there is a stigma attached to being allied with the CPA practice, and this,
at least in part is what keeps companies from admitting what they're up to.
The executive who shared his description of ''epileptic creative'' above, happens
to work for one of the major networks, and admitted on the condition of anonymity
that his company will in fact run CPA offers. ''We can technically take any
deal structure,'' he offered-but he refused to go on the record about his company's
practice. From his perspective, the stigma that comes with running those flashy
CPA ads would be simply too damaging to his company's reputation.
''Networks and publishers don't want to be pigeon-holed as a provider of CPA
because there's a negative connotation to it,'' he told ADBUMb. ''There's an
incentive to put out the flashiest, most obnoxious, action generating creative
that you [can] because that's where you get your response and that's how you
drive your effective CPM on a campaign. And publishers hate that.'' So to avoid
being ''pigeon-holed,'' companies have simply taken CPA off their roster.
Moreover, he explained, a well-branded site doesn't want or need a flashy banner.
For example, he suggested, ''If you work for a CPA network and you're Coke,
no way are you going to buy from them, because you know that the inventory…is
of such low quality. The only publishers that give inventory to straight CPA
networks are the ones who have crap inventory and couldn't do anything with
it to get it to monetize it more effectively elsewhere.''
A source who works for a CPA aggregator and who claims to sell these flashy
banners to both Casale and Fastclick was also willing to weigh in-albeit anonymously.
Some of the offers he claims both networks run include ''Free Maid for a Year,''
''Public School vs. Private School'' and ''Snickers vs. Kit Kat.'' Though neither
company would comment regarding their quiet offerings of CPA, this exec admitted
that Casale and Fastclick ''each do five figures of CPA'' with his company.
This same source is certain that the practice runs industry-wide. ''This isn't
just Fastclick,'' he said. ''Everybody says they run CPM only. [But] if the
offer is right and the pay-out looks right, they're going to run it on CPA,''
he said. ''That's just what's I've seen across the board.''
And he's not the only one. When a media buyer (who again wished to remain nameless)
was questioned about buying her media on a CPM from Fastclick and RightMedia,
she responded that ''We are actually currently buying all of those placements
on a CPA.'' When pressed further for information, she refused to reveal more,
instead cc'ing her lawyer and invoking the coveted ''publisher confidentiality''
response to cover the admission.
Yet another source, who was formerly employed by a major network and claims
to have actually handled their CPA advertising, claims that ''after the founders
left [Company X], they started to look at CPA advertising as a quick way to
make revenue. [Company X]'s eCPM across their network has dropped as low as
.35 CPM, because of mainly taking almost any CPA deal,'' he told ADBUMb. ''Now
they are dealing with tons of brokers who are bringing them the same CPA deals.''
So how are they making CPA dollars without anyone noticing? According to one
industry insider, though these companies are indeed working deals on a CPA basis,
"they're [still] booking it as CPM-because that's how it backs out."
Apparently, these networks convert their CPA income to an eCPM (or ''estimated
CPM''): they arbitrage the income brought in on CPA and then pay the publishers
based on an estimated CPM calculation. Additionally, there have been recent
whispers that some of these major networks may be engaged in the practice of
buying their own inventory at very low prices, paying the publishers on a CPM,
and then skimming the fat off the top. The legality of such a move is uncertain,
but it clearly raises a few questions about ''best practices'' across the industry.
Regardless of how they're doing it, it doesn't take an advanced degree in economics
to realize that if a network starts taking every CPA deal that crosses its desks,
the network itself will eventually bog down with these flashy ads and its inventory
will lose value. The one-time CPA handler agreed: ''The management of [Company
X] is unaware that their salespeople, while selling tons of CPA deals, are killing
the inventory. Many of the higher quality sites have all left [Company X] over
the fact that most of their ads are tons of these free-giveaway CPA ads.''
Plenty of sales-folk may be meeting their short term goals as a result of these
sales tactics, but who's bothering to think about the long-term affects of this
slow inventory death? It's hard to find anyone who fits that bill. As another
industry insider who has also negotiated deals with the larger networks suggests,
it's all about making money-now. ''Instead of selling my email for $1 CPM, I
can make $2 CPA,'' he told us. ''Everybody wants to move toward pay-for-performance,
so that's why they're doing CPA.''
As someone who's been around the industry block a few times, this exec also
tried to claim that omitting certain less than favorable practices from media
kits is a pretty common tactic and ''not a big deal''. That may be so, but if
what's going on really is no big deal then why was he-and everyone else we spoke
to-so nervous about being quoted about it?
But in the end, that's precisely what everyone was when it came to talking about
CPA: nervous. Major networks have oodles of money to throw their weight around
with and that seems to scare most people into anonymity for one reason or another.
And while these companies are busy making off like short-term heroes today,
in the long-term they're angling ever further in the direction of losing the
trust of their clients world-wide.
So big network honchos, how do you respond?
Copyright © by Cheap Web Hosting Directory, Affordable Hosting Services All Right Reserved.
· 
