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Can Media Agencies and CPA Networks Play Nice?

  |  August 25, 2009   |  Comments

What advertisers might gain if they could.

Ever since advertisers figured out they could track Internet actions back to the source, publishers and media agencies have faced pressure to accept performance-based and CPA (define) purchasing models. In the years since CPA advertising debuted, the online industry has matured, but can we say the same for the companies offering these buys?

Absent from the agency-CPA network relationship is the trust found in the typical agency-publisher relationship. CPA networks, brokerage firms, and "CPA agencies" peddle deals with relatively no governing industry standards. Noncommittal advertisers bandy about their ad dollars to the shop that can get them the lowest CPA cost, thereby pitting one agency against the next on a buy-by-buy basis.

CPA networks and brokers might not own the inventory; instead they seek to acquire, resell, and arbitrage the difference in inventory costs. Inventory owners have little loyalty other than to the highest dollar offered. It's every man for himself in these shark-infested waters as we all fight for our fair share of the virtual CPA pie.

How does this benefit our industry?

We media planners get why advertisers enter the CPA space. What's not to love about a buy that's guaranteed to deliver positive ROI (define)?

We also get why publishers offer CPA, particularly in a down economy where advertiser demand for this kind of buy is up. With $20 to $50 CPAs that back out to $0.25 estimated CPCs (define) and $0.50 to $1.00 estimated CPMs (define), publishers may make the same, and maybe more, from selling CPA buys than they would selling their unsold ad space on an ad network.

It's one thing when there is a true agency-advertiser relationship, and the agency can be given the latitude to carve out a portion of the client's budget for CPA buys without worrying about the whole account being shopped around buy to buy or, for that matter, without worrying about the network you just purchased CPA from turning around and contacting your client directly. It's another when you have a CPA-exclusive advertiser who just wants the best deal. Here, the middlemen pitching and brokering CPA buys don't necessarily play fair at all. All it can take is a quick cold call or e-mail that offers a deal that undercuts the one the advertiser currently has, and the client vamooses.

Rate cards? Ha! Standards? Not really. Transparency? Are you nuts?

To woo business, some CPA agencies and networks offer to produce and host vital campaign creative elements like microsites, landing pages, and ad creative at seemingly no charge. In this approach, the advertiser's offer is then opened to any and all takers.

Desirable CPA offers get double and triple brokered, and the eventual street CPA (what the publisher's actually paying) might be between 50 and 75 percent less than the advertiser ends up paying. Seldom does the client ever know this street value nor how much of a cut the middleman is taking.

Not only does this whole situation not encourage advertiser loyalty, but the advertiser might end up paying more than it needs to with no outside entity looking out for its best interests. No wonder the CPA segment has a rogue reputation and why buying CPA advertising is something most advertisers want to keep on the down low, even if it's working for them.

Herein lies the opportunity and the even bigger challenge: CPA advertising isn't going away, the advertiser really needs us all, and we as an industry need to legitimize CPA advertising for it to grow. The people who make a lot of money in this space don't want to see this happen, but if we're looking for growth, particularly from brand advertisers, standards must be implemented to normalize the process.

Under normal media planning conditions, the media planning team must help its advertiser understand the entire media landscape at the proposal stage, CPA included. The agency is critical for overseeing the advertiser's entire campaign from a non-biased perspective.

The CPA ad network, with its sizeable distribution, is needed. We need to figure out a way for us to all coexist, respect each others' boundaries, take a fair but reasonable share, and still leave enough money for the publisher without doing harm to the client.

I don't see this happening without the help of transparency and industry standards. And if it doesn't happen, it will remain a game of a few winners and too many losers, which isn't good for the industry at large.

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Hollis Thomases

A ClickZ expert columnist since 2005, Hollis Thomases (@hollisthomases) is president and founder of Maryland-based WebAdvantage.net, an online marketing company that provides results-centric, strategic Internet marketing services, including online media planning, SEO, PPC campaign management, social media marketing, and Internet consulting. Author of Twitter Marketing: An Hour a Day and an award-winning entrepreneur, Hollis is the Maryland 2007 SBA Small Business Person of the Year. Hollis speaks extensively on online marketing, having presented for ClickZ, the American Marketing Association, SES, The Newsletter and Electronic Publishers Association, The Kelsey Group, and the Vocus Worldwide User Forum. WebAdvantage.net's client list has included Nokia USA, Nature Made Vitamins, Johns Hopkins University, ENDO Pharmaceuticals, K'NEX Construction Toys, and Visit Baltimore. The agency was recognized as a "Small Giant" by the Greater Baltimore Tech Council and was chosen as a "Best Place for Business Women to Work" by "Smart Woman Magazine."

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