Performance- based advertising - Wikipedia, the free encyclopedia. Performance- based advertising is a form of advertising in which the purchaser pays only when there are measurable results.
Performance- based advertising is becoming more common with the spread of electronic media, notably the Internet, where it is possible to measure user actions resulting from advertisement. Pricing models[edit]There are four common pricing models used in the online performance advertising market. CPM (Cost- per- Mille, or Cost- per- Thousand) Pricing Models charge advertisers for impressions, i. Display advertising is commonly sold on a CPM pricing model.
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The problem with CPM advertising is that advertisers are charged even if the target audience does not click on the advertisement. CPC (Cost- per- Click) advertising overcomes this problem by charging advertisers only when the consumer clicks on the advertisement.
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However, due to increased competition, searchkeywords have become very expensive. A 2. 00. 7 Doubleclick Performics Search trends Report shows that there were nearly six times as many keywords with a cost per click (CPC) of more than $1 in January 2. The cost per keyword increased by 3. In recent times, there has been a rapid increase in online lead generation - banner and direct response advertising that works off a CPL pricing model. In a Cost- per- Lead pricing model, advertisers pay only for qualified leads - irrespective of the clicks or impressions that went into generating the lead. CPL advertising is also commonly referred to as online lead generation.
Cost per Lead (CPL) pricing models are the most advertiser friendly. A recent IBM research study[citation needed] found that two- thirds of senior marketers expect 2. CPL models allow advertisers to pay only for qualified leads as opposed to clicks or impressions and are at the pinnacle of the online advertising ROI hierarchy.
In CPA advertising, advertisers pay for a specific action such as a credit cardtransaction (also called CPO, Cost- Per- Order). Advertisers need to be careful when choosing between CPL and CPA pricing models. In CPL campaigns, advertisers pay for an interested lead - i. CPL campaigns are suitable for brand marketers and direct response marketers looking to engage consumers at multiple touch- points - by building a newsletter list, community site, rewardprogram or member acquisition program.
In CPA campaigns, the advertiser typically pays for a completed sale involving a credit card transaction. CPA is all about 'now' - - it focuses on driving consumers to buy at that exact moment.
If a visitor to the website doesn't buy anything, there's no easy way to re- market to them. There are other important differentiators: 1. CPL campaigns are advertiser- centric. The advertiser remains in control of their brand, selecting trusted and contextually relevant publishers to run their offers. On the other hand, CPA and affiliate marketing campaigns are publisher- centric.
Advertisers cede control over where their brand will appear, as publishers browse offers and pick which to run on their websites. Advertisers generally do not know where their offer is running. CPL campaigns are usually high volume and light- weight.
In CPL campaigns, consumers submit only basic contactinformation. The transaction can be as simple as an email address. On the other hand, CPA campaigns are usually low volume and complex. Typically, consumer has to submit credit card and other detailed information.
CPL advertising is more appropriate for advertisers looking to deploy acquisition campaigns by re- marketing to end consumers through e- newsletters, community sites, reward programs, loyalty programs and other engagement vehicles. Economic benefits[edit]Many advertisers have limited budgets and may not understand the most effective method of advertising. With performance- based advertising plans, they avoid the risk of paying large amounts for advertisements that are ineffective. They pay only for results. The advertising agency, distributor or publisher assumes the risk, and is therefore motivated to ensure that the advertisement is well- targeted, making best use of the available inventory of advertising space. Electronic media publishers may choose advertisements based on location, time of day, day of week, demographics and performance history, ensuring that they maximize revenue earned from each advertising slot. The close attention to targeting is intended to minimize the number of irrelevant advertisements presented to consumers.
They see advertisements for products and services that are likely to interest them. Although consumers often state that advertisements are irritating, in many situations they find the advertisement useful if they are relevant. Metrics[edit]Various types of measurable action may be used in charging for performance- based advertising: Many Internet sites charge for advertising on a "CPM" (Cost per Thousand) or Cost per impression basis. That is, the advertiser pays only when a consumer sees their advertisement. Some would argue that this is not performance- based advertising since there is no measurement of the user response. Internet sites often also offer advertising on a "PPC" (pay per click) basis.
Google's Ad. Words product and equivalent products from Millennial Media, Yahoo!, Microsoft and others support PPC advertising plans. A small but growing number of sites are starting to offer plans on a "Pay per call" basis.
The user can click a button to place a Vo. IP call, or to request a call from the advertiser.
If the user requests a call, presumably they are highly likely to make a purchase. Finally, there is considerable research into methods of linking the user's actions to the eventual purchase: the ideal form of performance measurement. Some Internet sites are markets, bringing together buyers and sellers. Bay is a prominent example of a market operating on an auction basis.
Other market sites let the vendors set their price. In either model, the market mediates sales and takes a commission - a defined percentage of the sale value. The market is motivated to give a more prominent position to vendors who achieve high sales value. Markets may be seen as a form of performance- based advertising.
The use of mobile coupons also enables a whole new world of metrics within identifying campaign effect. There are several providers of mobile coupon technology that makes it possible to provide unique coupons or barcodes to each individual person and at the same time identify the person downloading it. This makes it possible to follow these individuals during the whole process from downloading until when and where the coupons are redeemed. Although the Internet introduced the concept of performance- based advertising, it is now spreading into other media. The mobile telephone is increasingly used as a web browsing device, and can support both pay- per- click and pay- per- call plans.
Coupons delivered to the mobile handset can be used to link advertising direct to sales. As consumers start to use their mobile handset as an electronic payment device, it may become practical to establish direct linkage between advertising and purchases. The linkage may be indirect. A consumer may use their mobile phone to scan a barcode on an outdoor advertisement. This loads the advertiser's mobile site onto the phone. When the consumer shortly afterwards goes to the advertiser's store and uses their phone to make a purchase, the linkage can be inferred. Directory assistance providers are starting to introduce advertising, particularly with "Free DA" services such as the Jingle Networks.
FREE- 4. 11, the AT& T 1- 8. YELLOWPAGES and the (now- defunct) Google 1- 8. GOOG- 4. 11. The advertiser pays when a caller listens to their advertisement, the equivalent of Internet CPM advertising, when they ask for additional information, or when they place a call. IPTV promises to eventually combine features of cable television and the Internet. Viewers may see advertisements in a sidebar that are relevant to the show they are watching. They may click on an advertisement to obtain more details, and this action can be measured and used to charge the advertiser.
It is even possible to directly measure the performance of print advertising. The publisher prints a special telephone number in the advertisement, used nowhere else. When a consumer places a call to that number, the call event is recorded and the call is routed to the regular number. In theory, the call could only have been generated because of the print advertisement.
In practice, there is the risk that an inadvertent third party will find a number from an advertisement and submit it to an online or printed directory, causing it to receive additional calls for which the advertiser must pay individually as "leads" or enquiries. Some of the received calls may be misdirected product support requests from existing clients or even enquiries from suppliers, which are not new revenue and should not be counted as new leads. Toll- free telephone numbers are also notoriously prone to misdials which a company must pay to receive - often because a little- used number is one digit away from a major airline, hotel chain, hire car firm, bank or national franchise operator. Pricing[edit]A publisher may charge defined prices for performance- based advertising, so much per click or call, but it is common for prices to be set through some form of "bidding" or auction arrangement. The advertiser states how much they are willing to pay for a user action, and the publisher provides feedback on how much other advertisers have offered. The actual amount paid may be lower than the amount bid, for example 1 cent more than the next highest bidder. A "bidding" plan does not guarantee that the highest bidder will always be presented in the most prominent advertising slot, or will gain the most user actions.