Is CPA really advertising?

From: Kevin Frazier <kfrazier_at_adace.com>
Date: Thu 01 Nov 2001 20:04:00 -0500

<<Snip>> <<Miguel Taylor Alvarez wrote>>
Performance based solutions always win. In my opinion
again, all media buyers should be paid strictly on
commissions for selling CPA campaigns. They can buy as
much CPM and CPC as they wish but if they don't
perform to the guidelines of the CPA performances take
the loss out of their pay checks. It works. That is how
our entire company is structured. Only producers like
me get to keep their jobs :-) and are compensated
accordingly.
<<End Snip>>

We have seen many replies on this list that support your
thinking about CPA (cost per acquisition), but I'm a
little confused why so many people consider CPA
advertising. I grew up in sales. My father raised 6
kids selling cars. I was constantly subjected to
discussions on spiffs, commissions, incentives, and lost
leaders. CPA should not even be considered an
advertising term as far as I am concerned. Nor should
anyone be advocating it as the only real solution for
online advertising.

I agree that commission sales and direct marketing have
a great market in the online universe. CPA advertising
is really nothing more than retail sales wrapped in a
different suit. It is "not" advertising. We may be
using an ad as the sales channel, but the bottom line is
we are getting "x" in commission for every sale we
generate. We use ad banners, pop-ups, and other online
ad creatives to act as our sales force. The problems
that exist with this method is two fold. The advertiser
(manufacturer/supplier) gives you the creative to run,
and they control the transaction. In a normal retail
scenario you would get to sell the product via your
channel in "your" way, and you take the money and then
send the supplier a check. Right now suppliers are
laughing all the way to the bank using the current CPA
model that we have come to support online. And why
wouldn't they? Why would they buy advertising if they
can get their "retail" channel to take all the risk,
and give them the advertising for free. Oh, and they
get to control the transaction and keep all the upside.
What a sweet deal.

In reading all the support for CPA deals on this list,
it is becoming clear to me that there is going to be
a new retail process established via the web, and
currently it is being considered a form of advertising.
I just hope those that support it are truly clear on
what they are losing. Sure it works. So do commission
sales. But to give your advertising away for free, and
give up your right to collect the sale, and your
control over how it is sold/positioned. Ugh! Well, it
might be a great time in our history to become a
manufacturer/supplier.

CPA is not an effective advertising method, as it falls
short in many key areas. How do you run a CPA campaign
for Pepsi? Can you really track the transaction to the
purchase of a soda? For that matter all food groups?
The transactions have to be a specific form to work in
the CPA world. Sure sign-ups, co-registrations, email
list acquisition, etc., can work in the CPA world, but
if all you offer is CPA, then how are you going to run
a $10,000 branding campaign for a company that wants
people to choose their brand over another. What will
happen is Pepsi will buy your inventory on a CPA basis
and tell you they will pay you $1.00 for every email
address that signs up with them. You take 1 month to
deliver 10 million impressions to get 10,000 (1%) clicks
of which 1000 (10%) sign up with Pepsi. That's $1,000
dollars for 10 million impressions for 1 month. I
wonder how many of those 10 million impressions
converted to a sale of soda (or even a 12 pack... smile).
Wouldn't it be better to charge 10,000 for a month of
Pepsi ads across your site in fixed positions. Please
help me understand what I am missing. How is CPA the
best possible solution for advertising on the web???

I am a bit surprised that "Rob Frankel" the brand
evangelist would be such a heavy supporter of CPA as the
end all advertising solution on the web?

<<Snip>> <<Rob Frankel Wrote>>
Unlike TV or radio or print, the web has the ability to
make a CPA/CPC work. In fact, that's the only model that
will ultimately redeem the web as a venue. That doesn't
mean, however, that your site is responsible for making
the sale. Your site is responsible for driving users to
the advertisers' sites. You delivered the bodies to the
door; it's their job to drag them in. If THEY don't make
the sale, that's their problem, not yours.

Forget the CPM model. It doesn't work on the web.
<<End Snip>>

I hope those of us that are truly working toward creating
a sound online advertising model will continue to look at
ways to price our advertising inventory so it is
effective, valued, and consistent. My previous post
regarding charging over time, and basing CPM rates on
unique visitors seems to be a step in the right direction.
We can get more upside for delivered clicks when they are
above a certain percentage. The CPM rate could be
adjusted down if there was an agreement to share upside
on the sale, but again this gets very difficult to track.
I personally think we should stick to delivering the
eyeballs, and let the retailers, suppliers, and
manufacturers concern themselves with the sale.

Best of luck to us all!

Kevin Frazier
CEO
AdAce, Inc.
http://www.adace.com
kfrazier_at_adace.com




Received on Thu Nov 01 2001 - 19:04:00 CST