CPA Meets CPM: Is a Hybrid Deal Right for You?

The last article I wrote delved into acquisition ideas and tips. Many readers sent feedback, saying they especially liked the idea of returning to a cost-per-thousand (CPM) list, offering a cost-per-acquisition (CPA) or cost-per-click (CPC) deal if the initial test didn’t work out.

Well, there’s a new deal in town. It’s a hybrid and causing quite a stir. It’s essentially a combination of the CPA and CPM models. More on that later.

What Is the Story Behind CPA Deals?

Put your product in front of millions of opt-in email addresses with no risk or out-of-pocket expense — then only pay a small fee after your product sells. Sound too good to be true? Perhaps.

It’s hard to imagine the owner of a carefully cultivated opt-in list would provide carte blanche access in exchange for a small, back-end bounty. In fact, it’s even stranger that publishers gave away pop-ups, banner ads, and other valuable Web real estate chasing the same elusive dream.

CPA Is Nothing New

Traditional direct marketing firms have offered a CPA model for years. It evolved out of a demand for return on investment (ROI). Today, the CPA model is back in style for the same reason in the online world.

Publishers were starting to feel the sting because unscrupulous marketers used the CPA model to spam valuable opt-in lists and other forms of interactive media. What did they have to lose?

The end result was that many companies used the CPA model to analyze their offers risk free. Publishers lost money and were left with fatigued databases.

Has the CPA Deal Gone the Way of the Betamax?

No, but the ground rules have changed. One difference is that publishers now expect marketers to put a little skin in the game. Publishers are looking for a win-win situation. They’ve spent a lot of time and money building a precious commodity. They aren’t about to squander it by letting a marketer test an offer risk free.

Publishers and CPA brokers expect the marketer to first test the offer in front of a limited audience at their own expense. With test rates as low as $25 per thousand (sometimes lower), a marketer can test an offer to a target audience of 100,000 opt-in recipients for as little as $2,500.

The CPA/CPM Hybrid

These days, CPA brokers are structuring deals with a CPC component. These hybrids minimize risk for the publisher while giving the marketer valuable consumer feedback. Once analyzed, click-throughs provide the marketer with an opportunity to fine-tune offers. The click-through report may even indicate that pushing a sale is not the acquisition goal.

This new hybrid allows publishers to get out of the business-model assessment business. They no longer have to spend time evaluating individual offers and guessing at conversion rates. It’s about the math; after a hybrid test has been launched, each party is able to analyze the results. If the bounty equates to an acceptable effective CPM, the publisher and the advertiser agree to a rollout schedule.

By allowing the media partners a small guarantee of their cost, they are assured they will cover their cost and be motivated to make the offer perform.

The Hybrid Model Is Not for Everyone

A few points to consider in determining if your offer will work within this structure:

• Hard offer. This offer requires a credit card to complete the acquisition. Hard offers pull much lower conversion rates. 
• Soft offer. This offer does not require a credit card for completion. 
• Universal appeal. It is much easier to sell to publishers if the offer has a wide potential audience. 
• Independent reporting. Publishers are much more comfortable with an independent source for conversion reporting. 
• Brand. The offer will have much more pull if it is from a recognizable brand. 
• Geography. In most cases the offer must be a national or international offer. 
• Creative. Compelling creative and a simple landing page are necessary.

There are very few companies specializing in the hybrid model. Some that come to mind include Acquire Solution, DirectNet Advertising.net, and Direct Advertising Response.

If you know of more, I’d love to hear about them. Drop me an email. Happy acquisitions to you and yours!

–Lynne