NONE: ONLINE-ADS>> Cost-Per-Action Price Convergence
ONLINE-ADS>> Cost-Per-Action Price Convergence
R. Bradley Byrd (brad_at_newgate.net)
Mon, 14 Sep 1998 10:42:06 -0500 (CDT)
Ok folks, here's an industry survey of sorts regarding
banner models and rates. I'm trying to figure out what
makes sense as a credible price point for Cost-Per-Action
banner ads, as an alternative to Cost-Per-Impression models.
There's been CPM discussions here indicating that rates are
dropping down to $1. With industry CTR averages between
1-3%, that means a CPA (cost-per-action) of between 3-10
cents. However, you will rarely pay $1 per impression for
highly targeted sites, meaning that the CPM (and resultant
CPA) will be higher. Even at a $5 CPM (with 1-3% CTR)
you've got your CPA up between 17-50 cents. But recent
discussions hover around people looking for 8 cent CPA. I'm
wondering if that is realistic, and if the industry could
really handle paying more if the certaintly of the audience
and message delivery was higher.
Below I give a hypothetical scenario, presenting "ideal"
results for the advertiser. Consider it, and give me some
feedback.
-----------------------------------
SAMPLE SCENARIO (as an ideal):
Say that you sell soundcards (*nod to Joel*). Now, suppose
that I run a website on computer audio equipment. The
traffic that I get to my site is highly targeted, with
decent traffic volumes, and people interested specifically
in what you sell. You'd love every one of them to check out
your site. Say that I made a proposal to you -- I can drive
exactly the traffic you are looking for to your site. The
CTR from my site is *extremely* high (click-through
certainty -- I won't get into details, just trust that it's
true; we are testing a theoretical pricing hypothesis here),
and my track record proves it to be so.
+ What would you expect that you'd be willing to pay -- per
click-through -- if I could build a banner that did that?
Not through deception, smoke and mirrors, or trickery.
Honest click-throughs to check out your soundcard products.
You would know -- going with banners on my site -- that
you'd not only get highly-targeted traffic who would see
your banner, but also a very high click-through ratio. The
best of both worlds. Message delivery is up to you, I
deliver the targeted audience.
+ In a CPA model, what do people expect the final price
convergence would be for sites like this, that accurately
delivered targeted audiences on a consistent basis?
Remember, you'd be paying both for the *refined* audience,
and for the *predictability* of my sites audience delivery.
It boils down to this question -- if you *could* adopt a
model that was CPA, and that model actually delivered a high
percentage of qualified users (as opposed to a CPM model
that delivers a small percentage of decent users), would
media buyers be willing to pay more?
They keep saying that they want the CPA model, but if that
model turned out to be more expensive (but delivered high
volume, quality traffic versus scattershot approaches like
most CPM campaigns) would that justify putting more money
into web ads, and paying higher prices?
-----------------------------------
I'd love for people to discuss this on the O-A. And even if
you don't want to reply to the O-A, please drop me a line
(brad_at_newgate.net) letting me know what you think, how much
you'd expect to pay, etc. I'll compile the results and
repost a "consensus" in a week, if I get enough responses.
Thanks in advance,
Brad
Brad Byrd
Dir.Biz.Dev.
NewGate Internet
http://www.newgate.net
brad_at_newgate.net
415.331.3127
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