pay for performance direct response marketing

Necessary But Not Sufficient: Pay-for-Performance
Writer: Jim Meskauskas

I've been harping a lot lately about pay-for performance advertising: with clients colleagues, and in print. I have made it no secret my enthusiasm for pay-for-performance advertising as it pertains to the online media space. As it stands, pay-for- performance advertising has really always been less about advertising - traditional branding and awareness and more about an ancillary sales channel.

The beauty of the web is its accountability. I can track not only post-click activity, but also post-exposure activity. Like never before I can get a value of granularity as it pertains to the quality and quantity of transactions as a result of my advertising. The old saying used to be that I knew 50% of my advertising wasn't working, I just didn't know which half. The web tells me which half is working. What this has done has moved advertising from an actual world of correlative relationships between the messaging and it's effect to a potential world of casual relationships between the messaging and it's effect. And, as I said, this has created the conditions for advertising being used as a direct, albeit ancillary, sales channel. That, in turn, has necessitated pay-for-performance pricing structures.

This position of mine, which is quite popular among advertisers and buyers alike, has not endeared me to my friends on the publisher side. It is no secret as to why: in their eyes I am compromising the integrity of their inventory, reducing online ad inventory to a chatter commodity and not recognizing the value of, say, environmental associations or audience quality.

So, let me set the record straight with everyone.

I do LOVE pay-for-performance advertising and I think that the advertising industry, both on and offline, is going to see more of it rather than less of it. But I do not think that it is appropriate in every instance, and I'll tell you why.

1. Use of advertising as a sales channel is only ONE way to affect the bottom line of an advertiser. Regardless of our ability to use the web and read causal relationships between our advertising and its effects, one cannot dismiss the fact that there is something to be said for advertising that does not result immediately in an action. Otherwise, everyone would be doing direct response television, radio, and print and you would never see Coca-Cola ads in a network program. When doing a buy, get firm confirmation from the client as to whether or not immediate impact on "moving widgets" is the goal.

2. Though, as I said before, I'm an advocate of pay-for-performance, and I still think it's the right thing to do in every campaign, the buy can be like Heisenberg's Uncertainty Principle. I can tell you the velocity of an electron, but not the location; or I can tell you the location and not the velocity. Here, we can guarantee the advertiser the CPA (cost-per- action), but not the volume. Or we can go big with CPC and CPM and better guarantee them volume but not the CPA. An advertiser might want a demonstrable CPA projection, and it is possible to give them that. But one can sacrifice volume in the process.

3. You need to think about what the value of a placement is in its context. if you are using the web advertising space as an auxiliary sales channel, a commercial context certainly holds more value than, say, a sports content context. In this respect, online advertising becomes a lot more like print. Using trade print or the classifieds as your vehicle if you are trying to directly generate an action/sales makes a lot of sense because you are in transactional contexts. But I don't put ads next to presidential debate coverage in Time Magazine if that is my goal.

So, at the end of the day, pay-for-performance is a great way to make some quick hay, but it isn't the only way.

Copyright permission granted from David Smith of Mediasmith Incorporated. You can visit his website at: www.mediasmithinc.com/contacts/subscribe.html