Is CPL the Real Deal?

Recently I discussed “CPSA” (Cost Per Social Action), a potential pricing model that recognizes the growing importance of measuring a “social action”. This model is a variation of CPA (Cost Per Action). Both CPSA and CPA are far superior to basic CPM, which measures the cost of impressions, or even CPC, which relies on the cost of clicks.

In the final analysis, all online advertisers should be adopting, at the very least, a CPL (Cost Per Lead) model. After all, what every advertiser really wants from an online ad is a qualified lead – a prospect who has a demonstrated proclivity to buy. That’s the type of lead worthy of an advertising investment.

The problem is that lately, the price of ad impressions on websites has fallen. It’s largely because ad networks have lowered the barrier to advertising by spreading costs across many sites. So advertisers can get tantalizingly more impressions, and maybe even more clicks, for less money.

But is that a good thing? The metrics of more impressions can be deceiving – the pricing may look attractive, but ads with minimal targeting produce unqualified responses. What’s the value of lots of responses if they do not turn into the right leads?

The answer to the dilemma is for website publishers to sell, and advertisers to demand, ad space that works harder. In short, ads need to help qualify the respondent.

An article in Forbes references a recent report that suggests “marketers will pay publishers an average price of $2.27 for each reader they can convince to fill out a form with their real name and e-mail address, along with a few bits of personal data such as their Twitter handle, phone number or answers to questions about their shopping habits.”

While over $2 CPL may seem like a lot of money, the advertiser is, in effect, paying for valuable data about an individual prospect. This data can then be used to do a better job of communicating product benefits and, hopefully, convincing the prospect to buy. Forbes says the “hefty price [of CPL] suggests publishers should consider abandoning cheap ads sold for guaranteed prices and should instead try to use space on their Web pages to convince readers to turn over their personal information.”

The implications of this are significant, however. Ads need to engage prospects, and prospects must want to ante up details about themselves. In an age of privacy concerns, this could be a tall order.

Still, if online advertisers want to make the smartest advertising investment, they’ll soon recognize that it makes sense to pay a higher CPL to get higher quality leads. In the long run, they’re likely to see a higher conversion rate, and therefore a higher rate of return. That’s why CPM and CPC are being questioned more and more – and why the online world could be in for a big change in perspective.