Trends Report: Volume to Price Ratios
by Sam Harrelson
“I need a
higher payout to push this out to my good traffic.”
“OK,
well… I can give you a few more cents if you give me more
volume…”
And so
begins about thirty percent of the conversations that
happen everyday in the online direct response universe.
The publisher must constantly find the sweet spot that
exists in the complicated traffic formula: how to drive the
right amount of traffic to specific merchants in order to
get the most return on inventory or data. The negotiation
bee-dance is certainly a critical component of our industry
and allows for the establishment of such intangibles as
long-term relationships and customization.
However,
in an increasingly automated industry, how does the
negotiation factor maintain its hefty position as a key
determiner to the volume to price ratio? Simply put, can
negotiation as a practice, that thrives on friction, maintain
that position in a market where speed, optimization and
efficiency equate into real-time value?
In every
economic curve, there is a bliss point where all market
forces work together to produce the best results. For an
advertiser in this context, that point along the curve would
be one where a combination of strategic campaign buys and
relationship management skills produces the most amount of
traffic for the least amount of money spent and time
invested (time invested itself can be easily quantified by
money). However, many advertisers continue to fall below
their optimal point on the volume to price curve because of
their inability to efficiently maneuver the relationship
quicksand. Rather than making strategic deals that offer
the best return on advertising spend, the relationship
factor becomes the key determiner in success and bogs down
the process. This is especially true when an advertiser
is consistently dealing with the volume to price ratio in
full-effect as publishers demand more money for more
productivity.
There are
three avenues that an advertiser can use to optimize their volume
to price ratios and maintain a healthy relationship factor
with publishers while taking advantage of market forces that
lead to optimization. Those three avenues are the CPM/Portal
model, the CPL/CPA web affiliates model and the PPC model.
By finding the sweet-spot within the nexus of all three, an
advertiser has the ability to pay the price they feel the
market should demand for driving traffic or sales to their
respective site. Each of those avenues has their own unique
advantages and disadvantages. By identifying and coping
with these, an advertiser can make the best return possible.
The CPM/Portal
model has increasingly become a steadier model for
advertisers. As more publishers who deal with this platform
continue to develop and the CPM prices continue to become
more affordable or better recognized for their value,
advertisers are offered more choices than ever on how to
drive traffic through this model. However, the advertiser
must maintain a minimal buy level. The entry point for this
model is much higher than the others, and although the
long-term value can equate into a successful return, many
advertisers feel that the entry barrier is too high.
The
CPL/CPA web affiliate model is one that is driven by
performance. The advantages and disadvantages of the model
has been pointed out countless times. However, for this
discussion it is important to point to the fact that finding
“good” affiliates who can produce traffic is a full-time job
for an affiliate manager. It can be incredibly difficult
for an advertiser or media buyer to pursue these affiliates,
establish the necessary relationship and reputation, and
finally to close the deal. However, when done correctly and
with the right long-term mindset, this model can produce
positive measurable results with little investment of extra
time or revenue.
The PPC
model also has a high entry barrier in terms of
understanding. While that might make the initial “cost”
high, the actual price is significantly lower than all other
platforms. With just a few dollars, an advertiser can begin
a campaign. Another plus is the automation that has been
introduced into this sector. This automation means
real-time results, no loss of optimization due to human
error and the ability to manage everything first hand.
However, besides the amount of time it takes to learn the
model enough to operate successfully, which drives the hard
cost of the model up, there is also the issue of finding the
right keywords and constantly maintaining position within
rankings, etc. It is certainly not an easy task.
Finding
the optimized right mix of all three of these ingredients
can mean the difference between success and mediocrity in
this industry. However, an advertiser does have options in
their own volume to price curves. They have the ability to
set market prices for their services, products or offers and
not just rely on a few publishers who demand ever increasing
higher payouts. Finding the sweet spot on the volume to
price curve is essential, even if done tacitly.
Sam Harrelson is the Co-Editor of the Digital
Moses Confidential. He can be reached at
sam@digitalmoses.com
