11 Comments

CPA, not CPM, to Buy

Feb 28, 2007
by

As an affiliate manager, you’ll often be solicited for CPM or Flat Rate advertising. This happened to me at Zappos.com and at Shoes.com all the time. Now that we manage clients, it still happens frequently. I think this happens because the affiliate manager is public facing, i.e. a salesman can get his or her contact info. Moreover, there often is no CPM ad buyer. There may be a separate paid bid manager in house, but many online companies don’t do CPM in a serious way.

Why not? Because it usually isn’t cost effective. Take this recent spam solicitation, for example:

To enable us to promote the site effectively, partnerships will be subscription based rather than through affiliates. Subscriptions will be available for just £99/€149/$199 per month (minimum three month subscription).

As the solicitation was sent to Dermacia, I can do the backwards math pretty easily. Dermacia pays a flat $25 commission per transaction, so if this site delivers 8 transactions in one month, it will be cheaper to me to play at a flat rate. This is tempting. In the past, I have succumbed to such modest temptations, each time to find the advertising didn’t perform, even by these modest standards.

While I certainly value the power of branding, I find it is frequently exaggerated on individual web sites. There is, of course, a lot more to be said about branding vs. direct response but it’s worth noting that a web sites’ lack of motivation to deliver anything more than impressions (or, in this case nothing) is unlikely to contribute to the ROI you’re looking for.

About Brook Schaaf

You can find Brook on Twitter @brookschaaf.

Filed under: Affiliate Marketing
  • http://www.revenews.com/wayneporter/archives/002552.html Wayne Porter

    Brook,

    Personally, I like flat rate ads…why- you get rid of stupid abuse- at least for blogs…shopping sites- fine.

    Did you by chance follow those customers LONG TERM to see how much value they may have generated in terms of evangelists or bringing in new customers? Probably not- do executives value that- or just the quarter numbers?

    Long term what are all the hidden values that customers bring? Most don't track them- we haven't graduated that far. e.g. Mr. Molander talks all about low value customers ala coupons or now off of search, when does he talk about high yield customers? Do you reward more for them?

    And what about the dark matter out there? We really can't track WOM and with tech like cellular, VoIP, IM explosing…well you get the picture.

    Tracking and valuation of a customer is so crude at this point it is laughable- the metrics we go on are terrible- show me one and I can show you more than likely how it can be gamed.

    Then again pressure for short term gains puts managers in a crummy position.

    I think your initial instincts were right…you don't have measurement tools to justify it yet.

    -wayne

  • http://www.wayneporter.com/?p=183 Wayne Porter

    Note- I hope you weren't doing the math on a solicitation that came through spam…!

    -wayne

  • Patrick Grady

    Wayne, inherently flat rate doesn't do anything to inhibit fraud – the advertiser always needs to measure roi (or other metrics) to determine effectiveness.

    In my experience, site's with good traffic don't mind selling on a CPA basis to the highest bidder -and- CPM ads are almost always less effective than CPA ads, by at least one order of magnitude (specifically addressing roi/roas here).

    With CPM, the buyer takes all the risk. With CPA, the site owner agrees to take some risk. Selling on a CPM basis tells me that the site owner isn't willing to offer performance pricing – to share in the risk. That in itself, is significant.

  • http://www.cumbrowski.com Carsten Cumbrowski

    As with advertising in the real world is it with display advertising on the web. It is important where the Ad is displayed and to whom.

    Even if it does not directly convert as well should you not under-estimate the value of the right ads at the right place for the sake of Branding.

    There are times and places where people go and are not in the buying mood, not even to buy out of impulse. But they are your target audience and potential customer.

    You can't make them buy (very well), but you can expose them to your Brand.

    If ads are shown to the wrong audience or if the ads are not visible, money is wasted of course. It would be pre-dot com crash all over again :)

    There is room for both and both channels should be used, if you have a brand. If you don't, then hey, stick to direct marketing / affiliate marketing only.

  • http://www.schaafco.com Brook Schaaf

    I think you make good points. I would add that I think human nature will always be ahead of tracking, that good businesses will have to rely on principles to grow their buesinesses. And a lot of times a CPM or flat rate is a fair way to go.

    Also, it's worth noting that many times ad buyers don't much care about ROI. They may have a relationship with the person selling the ad or they may just have a budget to spend.

  • http://www.sideshowcollectibles.com Corie Clayton

    We typically use Affiliate Marketing in our niche, but have tried the CPM route on sites that we thought were perfectly targeted. Our effort, which was significant, was fairly disappointing. We initially recouped the CPM cost in sales, but not labor costs. After cancelled orders, we ended up losing a little. We tracked the performance for a full year, so it would take a sweeter deal for me to try this again. Our affiliates perform extremely well, and I think the long-term brand exposure they offer thier audience has a lot to do with it.

  • http://schaafco.com Brook Schaaf

    It's important to remember that many affiliates have shopping communities that return to them for shopping and browsing.

  • http://www.cumbrowski.com Carsten Cumbrowski

    Brook, those sites are a perfect example where Advertisers should consider to throw some extra bonus, flat fee or CPM for enhanced exposure for extra Eyeballs.

    If that works out great for both sides, then chances are good that the affiliate does the enhanced exposure for free the next time without the advertiser asking :)

    Point is, there is room for both and you should not make it a question of either or, but how to use each of the two in combination that makes the most sense and is fair for both sides.

  • http://www.zirh.com/affiliates.aspx James Dorans

    Well just getting back to a position that I use all avenues of internet advertising. Dealing with agencies and affiliates. I would rather deal with the affiliates. I believe that CPA has the most creditability and makes both parties work harder to acheive the sale.

    On a CPM and CPC bases it seems that they don't work as hard and actually gives you a lower ROAS/ROI and a lot more excuses mostly through agencies. I have experienced this at multiple levels and companies.

    That said I would pay for small placement fees becuase I understand that they have man hours to pay for. If a CPM in the mix I would still think about it.

  • http://www.snow-consulting.com Roger Snow

    With CPM advertising, you dont get people working hard on your behalf as they already have your money. Not to say that they dont want repeat business, but they dont have that added pressure to generate transactions to earn revenue. The only way to achieve real success and ROI with CPM advertising is if you pay a premium for maximum exposure and placement. With that, you still don't have a guarantee. With CPA advertising (affiliate marketing), people know they have to be smart where they place ads. If it converts, great, keep promoting. Maybe even ramp up the exposure. If not, find something else that will.

  • http://www.cumbrowski.com Carsten Cumbrowski

    All true, but I still think that CPM has its place and right usage where CPA and CPS will simply not work. There are plenty of places and times where people are not going to buy something. It might even be completely inappropriate to advertise something with the goal to convert. I think about places like religious communities, charity related sites etc.

    I stated in the past: "There is the time when to sell, time when to contribute and support and time when to educate. "

    In one of the 3 cases is CPA bad if not useless and CPM work perfectly if the right message is displayed. In another case of the three would be a mix probably more appropriate than just CPA based advertising and marketing to sell, to avoid deluding the purpose of the site, but still being present.

    This is more about what you want your brand see associated with by people.

    Those sites are usually the ones where advertising is not done or only little because of the sensitive nature of the subject.