Slice of knowledge : Pay-per-action is the new pay-per-click
There’s some new talk on the ad block these days. The thing is, it’s nothing new.
Since the first banner ad was uploaded to a Web page, there’s been a raging debate about what’s effective and what’s not. We’ve lived through ridiculously annoying pop-ups and SPAM beyond belief. We continue to deal with sounds blurting our unexpectedly and interactive display ads that seem to conquer content in spite of tastefulness.
There seems to be a shift starting to take place, however, that could transform the baseline metric by which advertisers buy and pay for ads. Instead of pay-per-click, interactive media buyers have their eyes set on paying only when there’s a quantifiable action that takes place.
This is an evolutionary concept that extends beyond the original metric created in Internet infancy: pay-per-impression. With this, the advertiser would pay, say, $100 for every 100k times a banner ad is shown on a site – regardless of whether or not there was any proof whatsoever that the visitor even saw it.
That concept evolved into pay-per-click, which is the predominant standard for advertising online today. With this model, conversion starts to creep into the picture. For example, for every 100k visitors, 100 clicked on the ad, establishing a conversion rate of .1%. It is a slightly more intelligent metric that surely fuels the most elegant of Power Point slides in marketing meetings – but marketer’s eyes are starting to become more aligned on the granddaddy of metrics: pay-per-action, which is circled back and internalized as cost-per-action.
This concept builds upon everything that’s great with pay-per-click, but adds a new layer that requires a specific action by a consumer in order for the original advertiser to be compensated for displaying the ad. It’s a big step because it requires the advertiser to step up to the plate and really understand what the client is trying to accomplish. If they’re good, they’ll realigning the ad strategy to not just maximize exposure (which is all good for awareness sake), but to maximize valuable actions by prospective customers by identifying the best place and time to display the ad – right down to the minute.
Pay-per-action also requires that there be an accurate means by which that action process can be tracked: from inception at the original advertiser all the way to the end result of someone completing a task. So while eyes have been set on the concept for years, the Web technology is only now starting to support a feasible practice in a significant way.
What are some of these actions? Here are some common ones that require people to:
- Sign up for a newsletter
- Configure a custom product (such as a car) and provide his/her contact information to a dealer
- Complete a survey
- Download a product catalog
- Buy a product
There are many factors that will determine the success of the action you’re trying to encourage. And, in essence, the level of difficulty of getting someone to complete the action starts to get factored-in to the rates you may end up paying to an advertiser. To some degree, there starts to become a new distribution of power back to the advertiser, which invites them to participate in the overall marketing campaign and fully understand what everyone’s trying to accomplish.
It’s an interesting concept that for some time will likely only be executed well by those who plan for and fully embrace the concept when developing new online marketing campaigns.
The New York Times ran a story on the subject of pay-per-action earlier in the week, which may be of interest. It runs through a case study of trying to buy an iPod from various sites – some that utilize pay-per-click and others that employ pay-per-action. Jellyfish.com was the site cited, which splits the commission with the buyer and ultimately landed the customer the best deal – by $.40.
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