Two weeks ago, we went over
Online’s comeback kid, the CPC. Today, we’re looking at the
ugly ducking of online advertising, the CPA. Cost Per
Acquisition has not had an easy life. Having spent most of
its life trying to gain the type of comfort from both
advertisers and publishers that the CPC has, CPA has ridden
a rollercoaster over the past several years. CPA, for the
purposes of this article, refers primarily to lead
generation programs and straightforward transaction-based
actions, commonly referred to as CPL and CPS by others
respectively.
For reasons not hard to
understand, direct marketing advertisers have long loved the
CPA. It represented the ultimate in little to no risk
advertising. Some sales people too loved the idea of the
CPA. Assuming the year is not 2004 and you are hearing the
“I have an unlimited budget” pitch for the first time, you
would like it too. Sales managers and those with forecasting
and financial responsibilities soon hated it and for good
cause. The CPA presented them with a nightmare of a time in
attempting to set IO size and predict the amount of money
such deals would bring. With sales people writing up million
dollar insertion orders and accounting sending out $52.33
invoices, many companies gave the cold shoulder to the CPA.
Publishers, especially in the
good old days, gave the CPA the cold shoulder. If you
thought the CPC was a tough sell in 2000, imagine being the
one pitching a $3 mortgage or debt lead. Then, in 2001
something strange happened, particularly in the direct
marketing / performance-based arena – the rise of the CPA.
Like a high school kid bullied but now the state amateur
boxing champion, the CPA came with a vengeance. Like the
movie Three O’clock High, you could not escape the
CPA.
Many publishers hated the
shift towards CPA accountability. One of the earliest
arguments against CPA (and even CPC) centered on all of the
potential free branding advertisers received from CPA
advertisements. And certainly more than a few advertisers
tried to exploit that fact, but ultimately CPA trumped those
actions. I credit email marketing and the ad networks for
CPA’s rise in online market dollars and respectability.
Email marketers started a trend that I never thought
possible. In 2002 I believe, some publishers actually
preferred, even asked for CPA over other forms. This remains
true today.
All of the sudden, rather than
being a form of advertising that went counter to their
business interest, the email publishers saw it as an
equalizer. They rely on the networks for sales, tracking,
payouts, and rely on the pricing model to keep all parties
more honest. In their minds, CPA allowed them to best gauge
what offers worked, which didn’t and to have trust in the
results and networks (who were equally motivated to keep the
advertisers honest). The flourishing email business and its
acceptance of CPA made millionaires out of many companies
that otherwise arguably would not have made it. For example,
there sprung up product deals that could go from just a web
page, a few creatives, no real inventory, and a checkout
cart to gang-busters almost over night. It’s hard to think
of another medium that can allow such growth with such
little expense.
The rise of the CPA did not
come without some downsides. Many brands, while in favor of
the CPA, shied away from it for fear that it left them with
little control. They would rather play a flat rate and know
exactly how and where there brand was displayed than give
control over their babies to some cowboy that might feel
entitled to alter the message or display it in a fashion or
frequency they didn’t approve. CPA offered no direct
financial risk but a non-quantifiable brand risk with no
protection. As a result, they steered clear.
Last year, email started to
come on hard times and now from the networks’ perspective
operates only at a fraction of what it once did. This
however, did not hurt the CPA. It found a new home in one of
our other favor topics, the registration path. Amazingly
enough, the same pioneers that made CPA commonplace and
accepted by publishers continue to do so. While their email
revenues are down significantly, their total
performance-based dollars, especially CPA dollars continue
to rise. And given that CPA will most likely continue to
resonate with advertisers, it is likely that we will see it
continue to thrive. CPA might not be hot enough to get into
a trendy LA night club, but it won’t care when it’s kicking
back on its private island in the Caribbean, somewhere next
to Amway’s.
Jay Weintraub
