Those redefining how many
companies look at the landscape are the desktop
applications, a.k.a. adware. These companies, known for
their targeting, branded advertisers, and high CPM rates,
don’t generally come into mind when thinking of potential
sources of distribution for standard CPA ads. The reason
that these desktop application companies have turned to
performance-based options in the first place is simple –
inventory. With millions of members and an average showing
of two plus ads per user per day, that leaves these
companies with excess inventory. And, given the sales effort
needed in order to fill that inventory for the $15+ CPM rate
card, many successful desktop companies choose to turn to an
outsourced solution for a portion of their ads.
This article does not deal
with the more contentious topics surrounding desktop
application such as; the user perception or their ability to
potentially override other affiliate links. Instead, it deals
with the unexpected results of their becoming affiliates,
results that often have networks and advertisers scratching
their heads when reviewing stats until the nature of the
traffic sending it becomes clear.
When it comes to showing ads,
especially pop-unders, there appear to be two distinct camps
– those that believe in showing a creative, and those that
prefer to launch the landing page of the advertiser being
promoted. Both tend to give the same reasons for wanting to
do so, performance. The creative camp believes that an ad
pre-qualifies a user and delivers better traffic. The
landing page group asserts that users will convert better by
not having to click on an ad. Regardless of the camp
followed, neither is going away, but it happens to be the
landing page pops from desktop applications that present
both an opportunity and a challenge for advertisers and ad
networks. The main reason for desktop applications being a
challenge has to due with the manner in which they drive
their traffic, i.e. landing page pops, as it often conflicts
with how the networks and advertisers have set up their
business to receive traffic, i.e. from clicks off some form
of creative.
The disadvantage of popping
landing pages from the advertiser and network perspective is
cost. Ads are cheaper to serve than landing pages. Landing
pages require more bandwidth, backend applications,
processing power, and monitoring of connections. Blast a
landing page, and it can go down. Hackers do this to
companies often. But showing an ad several million times per
day requires less skill and attention to maintain.
For advertisers that do not
know from where the traffic comes, seeing a huge spike in
the number of clicks to their landing page can cause them to
shut down the link. This is especially likely when that
advertiser compares the value of the visit with other
traffic vehicles. The average search click to the advertiser
page goes for $.22 or $220 per thousand views; even banner
clicks on the clickiest of banners can net $.01 or $10 per
thousand views. Often, desktop applications will make due
with $5 effective revenue per thousand, making the click
worth $.005. When tens, even hundreds of thousands of
“clicks” come in a short period at a value below any the
advertiser is aware of participating in, it becomes
understandable why they might jump to the conclusion that
the traffic is not worth having.
The same situation is true for
the large number of networks using ASP technology to run
their network. Typical business operations have the ASP
allocating a certain number of clicks to the private labeled
network, with the overages being billed on a cost per click
basis. For the users of the ASP, they rely on ads to lower
the number of clicks and help them earn enough profit on the
resulting clicks to make the ASP solution worthwhile. When
desktop applications send traffic straight to the landing
page, they can almost instantly use up the network’s entire
click allocation and then some. This wouldn’t be so bad were
the ASP pricing model set up to handle landing page pops.
The math shows why desktop
applications can hurt private label networks using an ASP
solution. Networks often payout 80%+ of the CPA they receive
from the advertiser. If a desktop application runs a
particular ad and nets $5 effective revenue per thousand,
this means the ad network earns at most $1.50 in profit. A
$1.50 per thousand yield looks good when paying $.20 per
thousand in costs but not when you pay $.0015 per click as
that equals $1.50 per thousand! And because the network’s
cost per click is often $.0015 or more, having desktop
application affiliates can spell trouble if that publisher
doesn’t keep their effective earnings per thousand up. All
of the sudden the network can go from earning 20% margin
plus a maximum of 10% on costs to no margin or negative
margins depending on the earnings of the landing page pop
publisher.
In order to take advantage of
this revenue, advertisers, networks, and ASP providers need
to do what they often do best and adapt to the changing
market needs. Rather than trying to squeeze this new breed
of publishers into an existing mold – one developed because
of the traffic patterns at the time – all parties should
look for ways to facilitate the desktop applications because
it will lead to more money in the end for the industry.
Advertisers may need to create simpler pages and ASP
providers might need to adjust their pricing, but everyone’s
bottom lines will be thankful. And perhaps, even the end
user will benefit too, but that might be asking too much!
Jay Weintraub
