Avenue A Urges Advertisers to Think “Cost-Per-Revenue”

Online advertising optimizer Avenue A believes CPR can help resuscitate the Web ad industry. CPR as in cost-per-revenue, that is.

The Seattle-based online marketer said it’s seen promising results from a pilot program for Best Buy, in which the new metric was used to evaluate media during a 15-week Web ad campaign.

Appropriately enough, the metric aims to optimize based on revenue generated from particular publisher sites and the other digital channels in a media plan.

According to Avenue A, using cost-per-revenue instead of cost-per-sale, cost-per-action, and the like, produced better results, since it considers the number and size of sales. As a result, the company says the metric lets marketers more accurately determine how much they’re spending to generate a dollar of revenue from each site or channel.

For instance, during Best Buy’s campaign, Avenue A said it found that some publisher sites efficiently produced a high number of sales, but had low average order sizes. Conversely, they saw a number of publisher sites that produced few sales, but resulted in high total sales revenue.

“By using the cost per revenue metric, we are finally able to measure factors that are important to us, such as which sites are generating the greatest revenue and the highest margins, and then adjust our marketing choices accordingly,” said Bettina Hanna, Best Buy.com’s director of brand and acquisition. “This is a big step beyond knowing only which sites are generating the most orders.”

During the Best Buy campaign, optimization based on the metric eventually reduced CPR by 36 percent, Avenue A said.

It’s no coincidence that the company sells a product that incorporates CPR analysis and optimization. But while the findings may help the company push its new Vital Signs reporting technology, the rest of the Web media buying, planning and selling world still could learn something important by considering the alternative metric.

In addition to the possibility that a CPR-optimized campaign could produce better bottom-line results than those optimized through cost-per-sale, there’s also the chance that tactics oriented toward cost-per-sale or cost-per-action could be less effective.

That is, Avenue A said 30 percent of the sites that it retained based on cost per revenue would have been dropped if they were evaluated on the CPS metric alone — since sites with fewer, but more pricey sales are viewed under CPA as less efficient than sites with more transactions of lower value.

“Cost per revenue represents the next step in the evolution of digital marketing metrics,” said Young-Bean Song, director of the Atlas Institute. “With CPR advertisers can develop campaigns that more accurately deliver on their business goals.”

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