E-COMMERCE Knock-down, drag-out CPM vs. CPA (991 words)
As any tried-and-true direct marketer will tell you, the way to minimize risk is to test, retest and test again. Altering the price structure simply exonerates a marketing department of any responsibility over determining what works and what does not. If publishers accept all the risk, they become nothing more than commissioned resellers.
There is a good deal of buzz about how well online advertising brands a product. Take this simple test: Does "Punch the monkey and win" mean anything to you? What is Bonzi? Do you know "How low do you want your APR"?
CPA deals don't compensate publishers for the huge amount of branding and exposure they generate for advertisers. Many people need to view an ad many times before they actually decide to buy. The value of branding may be uncertain, but it certainly is more than zero.
What is a customer worth?
Advertisers have intimate knowledge of what a customer is worth and how profitable different customers are. The publisher has almost no insight into every advertisers' market segment, and thus no ability to extract a fair market price for a customer.
When the advertiser sets the CPA price, the publisher almost always gets a bad deal. Even with CPM pricing, the advertiser has all the pieces of the puzzle: exactly what the buy cost, how many people saw the ad, how many customers were acquired and how much those customers are worth. With CPM pricing the publisher can objectively compare different advertisers and be appropriately compensated.
Both advertisers and publishers must trust each other regardless of the advertising pricing structure. Unlike impressions and e-mail that can be tracked by third-party auditing services, publishers have no way to audit and validate the sales reported to them. What's more, advertisers are unlikely to give publishers access to the sensitive data necessary to evaluate the risk that publishers bear—even if they had a way to do it.