Interep Firms Shun CPA Deals

In what threatens to become a serious issue for the Internet advertising world, the online units of radio rep giant Interep said they would refuse further cost-per-acquisition campaigns without a minimum cash guarantee.

In an e-mail message to his sales forces earlier this week, Interep Interactive chief operating officer John Durham encouraged them, starting next Monday, to “take a stand for the industry and refuse this business … We are professionals and we should generate real dollars for our sites, for your efforts and for our companies.”

The company’s two New York-based online units, Winstar Interactive Media and Cybereps, together represent more than 100 sites and broker dozens more e-mail lists. And like several other players in the space, WIM and Cybereps say that CPA deals are blatantly unfair for media sellers, since the quality of the creative and the Web site to which users click through are both crucial to an acquisition. Naturally, these two factors are entirely out of the hands of publishers and their rep firms.

“Our sites do not want this business,” said Durham, who is also president of WIM. “This is not advertising, this is outright thievery. CPA campaigns … take up an incredible amount of inventory for which our clients receive no compensation and the sites have to eat ad serving costs. With these campaigns we take 100 percent of the risk and the rewards are few and far between. They are simply not worth our blood, sweat and tears.”

“We only took four CPA deals and found them all unprofitable and not worth the inventory that was given,” he added. The “killer was the comment from the agency — ‘We get our fee, so you make it work.’ It is the inherent issue of risk.”

Yet for obvious reasons, the model is popular among advertisers. Theoretically, because they pay only when a consumer converts, they save money spent on impressions that had no effect.

Additionally, several major ad sellers — such as Westlake Village, Calif.-based ValueClick — have made CPA deals the crux of their value proposition. Indeed, ValueClick’s proposition as a seller of performance-based deals have helped it weather the current downturn in online advertising somewhat better than most CPM-based competitors. (Last quarter, the firm posted a pro forma net loss of $0.01 per share, while L90, Engage and 24/7 Media all posted double-digit per-share pro forma net losses; DoubleClick saw a $0.07 per share loss.)

And, as the advertising climate continues to drag, some publishers say they’re at least willing to consider taking on CPA deals — just so they can get any sort of revenue.

“I can see why [Interep’s units] are upset,” said an ad sales manager at a San Francisco-based Web publisher. “Everyone basically feels that way … but it’s getting to the point where I know we think twice about turning down any kind of sales deal, because there absolutely comes a time when you need to produce that insertion order.”

Added an Alley-based account executive, “It’s sort of like [advertisers] are holding our feet over the fire — they have the money that we want, and they can make us jump through hoops to satisfy them. And because the market’s like it is, we’re inclined to jump. It takes some guts to say you’re not going to.”

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