Kim Malone, Director of Adsense at Google, spoke on the various pricing models that are emerging in online advertising, specifically in Google’s Adwords/Adsense. She stressed that the consumer buying cycle can be summarized as
- awareness – prospects become aware of a need or problem
- consideration – prospects consider their options
- action – prospects take a specified action to fulfill their need or solve their problem
Pricing Models
Advertisers must meet customers at each stage of their buying cycle and focus their ad’s message. Right now, there are three types of pricing models for ads:
- Cost Per Mille (CPM) – Advertisers buy ads based on a set cost per thousand impressions (impressions = the number of times an ad is displayed).
- Cost Per Click (CPC) – Advertisers buy ads based on a set cost each time someone clicks on their ad.
- Cost Per Action (CPA) – Advertisers buy ads based on a set cost each time someone takes a specified action. This is the newest type of ad Google has been experimenting with.
During the conference, CPA came up repeatedly. That’s not surprising because from an advertisers’ standpoint, they only want to pay when someone deliberately takes an action. It’s not as attractive from a publishers’ perspective because not only must someone click on an ad, but they must also buy something.
Which Is Better?
I run a number of websites, and the idea of running CPA ads seems a lot like affiliate marketing – it’s up to you, the publisher of content, to sell the product so that by the time someone clicks the ad, they’re ready to buy. That said, Google currently has explicit rules forbidding publishers from encouraging their readers to click on ads. That may change with the CPA model, but for now, they don’t seem to be changing the rules.
There’s also the issue of accountability – how can Google ensure that advertisers report their sales? Kim assured us that is something Google takes very seriously and won’t serve ads unless they are certain the advertisers will pay. Right now, they’re experimenting with setting up a system whereby as long as the customer buys within 30 days of clicking the ad, the publisher will get the sale.
From my perspective as a content publisher, it’s far better to use a CPM or CPC model where I get paid each time an ad is displayed or each time someone clicks on an ad. If I can’t encourage people to click on the ad to buy a product, what incentive do I have to show that type of advertising? I will be curious to see how publishers respond to this type of advertising.
What do you think? As a blogger or content publisher, what do you think of CPA? Would you use it on your sites?
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