CPA CPM etc.

From: Leo Sheiner <leo_at_managebid.com>
Date: Wed 21 Nov 2001 15:58:26 -0500

You know how it can be when you meet an old friend
after a long absence. Within minutes, it is like you
have never been away. I have continued to subscribe
to online ads even though I have just been too busy to
read the posts let alone reply to any for the last year
or so. Well now that www.managebid.com is well under
way I thought it time to revisit an old friend and what
do I find? The same subject of CPA versus CPM and CPC
being rehashed as if it hasn't been discussed to death.

I was long an advocate for CPC and CPA when CPM
was the norm. I built a very profitable network
www.safe-audit.com on the strength of my belief in
charging advertising by results because so many
publishers resisted anything other than CPM. I argued
then as now, that traffic on the net will always far
exceed the demand. In that situation the customer is
king unless you have some really unique demographic
that can give you special leverage. I see no reason to
change my belief (that has served me so well) that if
you want to compete with offline advertising (whose
volumes make online look puny) you have to offer
something more than they do.

Take a look at these stats from Jupiter Metrix that
showed ROI and customer satisfaction from various
sources of traffic.

Source of traffic ROI Overall satisfaction
CPM Banners 19% 12%
CPC Banners 21% 16%
Paid Inclusion 31% 23%
Opt-In Email 33% 24%
Pay for Placement 41% 29%

Paid inclusion is traffic from PPC SEs and shows double
the ROI to CPM banners and 50% better ROI than CPC banners.
Interestingly Opt-in email is only a percentage point
better ROI than PPC SEs. Pay for placement is essentially
affiliate deals and as most of these are results based I
would expect a higher ROI and customer satisfaction, in
fact I am surprised it isn't higher still at only five
percentage points better ROI than PPC SEs.

I would like to focus on ROI since I have always maintained
ROI is what it is all about. The rest is interesting for the
people managing traffic but for the guy writing the checks,
only the bottom line counts. The really neat thing about
advertising with PPC SEs is that you can modify your cost
and volume of traffic from each source in realtime. As soon
as you log in and reduce or increase your bid on any
keyword in any SE you will have an immediate impact on both
your costs and volumes of traffic from that source. It
follows from this, that if you can add an analysis of your
ROI into the loop, you can increase or decrease costs and
traffic volumes from any source according to how profitable
or otherwise that source is (or would be).

Doing this manually, if you have perhaps a few thousand
keywords and could be using ten different sources of traffic
is simply impossible. Even with smaller volumes it would be
tedious at best, inaccurate and not a cost-effective use of
time at worst. At www.managebid.com we have used
clever tracking and some very sophisticated mathematics
to solve this problem. I have been in Internet advertising
for six years now and I think Robo ROI is the most exciting
development I have ever seen because it actually can
guarantee the maximum ROI for any budget.

We have just finished the latest report module for Robo ROI
and frankly it is amazing. It shows each source of traffic with
a breakdown of volumes, costs and value generated. That is
easy enough to do but still very useful. But here is the magic
that comes from the maths, it shows the user where the bid
started, where it is currently and projects the volumes,
costs and value generated for each position that it either did
or could have bid for. Of course you can sort this output in
many different ways to provide different views that can gain
you even more insight, but the essence is that not only is
your budget being managed to achieve the maximum results
for your money, but you are getting a comprehensive
scientific analysis of all the alternatives to justify the
decisions automatically made on your behalf. In my view that
has never been done before and is a significant milestone
reached for the advertising industry.

In other words I am saying that the writing is on the wall.
There are massive opportunities for the Internet advertising
industry. The current advertising slowdown and business
recession will not last forever. It will bounce back soon
enough but there are some fundamentals here that will not
change. We have barely scratched the surface. But if we want
to succeed we have to learn how to connect the value we give
to the costs we charge in a way that offline advertising
cannot replicate.



http://safe-audit.com Pay per action high volume web traffic
http://www.managebid.com Guaranteed Results from PPCSE's
Leo Scheiner mailto:leo_at_netcomuk.co.uk +44 208 731 7077





Received on Wed Nov 21 2001 - 14:58:26 CST