Google’s foray into Pay-Per-Action advertising got a lot of play this week, including from me. But late last week, I noticed a smaller player with an even more interesting twist on Web advertising. It made me start to wonder about all the different models and where they are going.
When Web advertising first started, you mostly saw fixed placement where you negotiate for a banner ad in a particular place on a specific page, paying for a time period (such as one month) just like a billboard. Fixed placement is not the way a rookie marketer should break in—you need to know what you are doing before you negotiate a long-term, hard-to-change commitment. But that was the only game in town.
Then rotating banner ads and keyword-based advertising emerged, starting with the per-impression model, where you pay for each time the ad is shown, just like a magazine. Usually referred to as CPM (cost per thousand—“M” is the Roman numeral for one thousand), you pay each time your ad is displayed on the screen, whether its clicked or not.
Then the world changed with the per-click model. Although pioneered by Goto.com (later renamed Overture and swallowed up by Yahoo!), it’s often called CPC (cost per click) or PPC (pay-per-click). It just means that each time someone clicks on your advertisement, you’re charged a fee. The original PPC systems ranked each ad by its pay-click bid, but Google introduced the idea that click rates and other factors should also influence the rankings, which now all major PPC providers have emulated.
Shopping search engines, Snap.com and a few other pioneers quietly introduced per-action pricing, but now that Google announced its beta program this week, the industry is paying attention. Often called CPA (cost per action) or PPA (pay-per-action) you pay only when the customer takes “action”—typically a purchase of your product. This is no different from the way affiliates get paid, but we never really thought of affiliate marketing as advertising—it seemed different. Well, maybe it isn’t.
But here’s something that is different. Squidoo has announced a twist on the venerable old fixed placement advertising. Pay Squidoo for a month to put an offer out there—so far this is merely time-honored fixed placement—with a twist. SquidOffers allows surfers to vote for the best offers, which then rank higher. (Is this social advertising?)
Seth Godin explains how he expects SquidOffers to be used, and I wonder if this is the same kind of tweak on fixed placement that Google’s click rate insight was on per-click advertising. I doubt it will turn out to be as important a tweak, but it is an interesting way to bring social interaction into advertising.
The more people do with social media, the more it seems can be done. The defining difference of the Web has always been the links. Web 2.0 is now causing the content to change based on participation. The content connections are no longer more important than the people connections.
I’ve always been a huge proponent of measuring the success of your site, and for adapting to what customers do, and for calculating the value of your customers. Given an ever increasing array of advertising choices, it’s getting to the point where you can’t really operate unless you do these things. A few years ago I thought the Internet allowed you to optimize your business based on metrics—now I think it forces you to.
