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Beware the Lure of the Cost per Click

  |  December 28, 1999   |  Comments

Back in the good old days of online advertising, the greatest data point ever offered a brand manager engaging the online medium for the first time was his or her cost per click. It became a mantra uttered by every interactive advertising enthusiast, it was in the title of every seminar at every industry conference, and it could be found in the titles of industry articles. It became the philosopher's stone of accountable advertising.

Back in the good old days of online advertising, the greatest data point ever offered a brand manager engaging the online medium for the first time was his or her cost per click.

"The cost per click." Ah, what a beautiful sound that used to be. It sounded simple, represented a ratio, and the phrase's alliteration gave it poetry.

"The cost per click." Sondheim and Bernstein put it best: "Say it loud and there's music playing; say it soft, and it's almost like praying."

"The cost per click" became a mantra uttered by every interactive advertising enthusiast. It was in the title of every seminar at every industry conference, and it could be found in the titles of industry articles. It became the philosopher's stone of accountable advertising.

But, finally, a metric that was allowed to gain momentum by being wholly unencumbered by the process of thought was subjected to some cause-and-effect rationality.

"Wait a minute," people started asking, "what is the actual return on our investment? Sure, we are finally demonstrating a cost per response, but what is that yielding for me on the back end? Am I moving widgets, or am I just attracting a lot of people to my site who don't do anything?"

And, suddenly, true direct response marketing metrics were brought on stage with click-through rates and cost per click as main characters in the play. Marketers and advertisers began to ask, "Just what is my return on investment?" And thus entered the most powerful acronym yet to dominate the online advertising vernacular: ROI.

ROI asks from the advertising effort: "What does it cost me to get a new customer? How much do I have to spend to get an order? And, ultimately, for every dollar I spend, how many dollars do I get back?" These are the most powerful questions asked of every marketing investment and these are the questions the current spate of online metrics seeks to answer.

But lo and behold! I still have new advertisers come to me asking about their cost per click. "Oh," they say, "that site's no good because it doesn't have a low cost per click." Or they'll ask, "Why did my cost per click go up this month when I'm running on the same site?"

The interactive ad industry did so much to pump the accountability of the Internet during the early days of online marketing, and cost per click was the most ready-to-hand metric to demonstrate this accountability, that the mantra still echoes through marketers' heads today.

Newly minted MBAs are getting their first jobs out of business school at dot-coms and their heads are full of learning borne on the shoulders of texts and articles that, by the time they reach the syllabi, are already dated. Or, even worse, they do understand the importance of a cost per back-end action metric but have not yet implemented a means by which to determine what kinds of activity are taking place on the back end.

And so we are left with the cost per click, as it continues to dominate discussions in client meetings, industry conferences, and Internet advertising discussion lists. It maintains its eminence as a viable direct response metric in the online medium, and there seems to be little we can do about it.

However, if post-click activity tracking is possible for the advertiser, then one can subvert the dominant paradigm of the cost per click (sounds like a bumper sticker you'd buy in Berkeley). With data on post-click activity, you can begin to match up efficiency of response with efficiency of action, whether it be sale, order, down load, registration, etc.

Ultimately, you know, it is not the efficiency of the lead generated, but the quality of that lead. Would I rather have for my dollar ten leads that don't buy or one that does? Easy question.

So be careful when encountering the siren song of cost per click. Though I always recommend that an advertiser test a cost-per-click media buy opportunity, I think it is wise to caution against basing a decision to move forward with a site solely on that metric.

So until the arrival of significant broadband penetration and the opportunity for branding, long lives the new mantra, ROI.

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ABOUT THE AUTHOR

Jim Meskauskas Jim Meskauskas has had a long career in both traditional and interactive media. He was most recently the Chief Internet Strategist at Mediasmith Inc., where he worked with a range of clients -- from BabyCenter and CBS MarketWatch to Eidos Interactive, Roxio, and LuckySurf. He has also been in media at Hawk Media, Left Field, and USWeb/CKS. He is a founding board member of the Society for Internet Advancement San Francisco, where he oversaw communications. Jim is now developing an independent media consultancy called Media Darwin.

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