Is Pricing Per Transaction the Coming Ad Model?

Hybrid cost-per-transaction ad pricing models increasingly are showing up on
the Internet and some advertisers are requiring that ads lead directly to
sales.


“The hybrid model is for e-commerce advertisers who are looking to generate
sales as a result of banner advertisements and links,” Rich LeFurgy, chairman
of the Internet Advertising Bureau, told Adweek. “It’s where I think the
market has evolved to.”


LeFurgy said the shift toward hybrid models has been emerging for about three
to six months, though the overall ad community still prefers CPMs because
they are easy to valuate.


The deals are mostly long term, about six to 12 months, because it takes time
to develop a track record, Adweek said. And what the advertiser pays up front
is typically a lower amount than a straight CPM.


“This is really equitable for both parties because the media site gets
valuation for its audience. The advertiser gets a [model] that’s more
performance based,” LeFurgy said. “In this case, both parties get what they
want.”


One proponent of cost-per-sale models is Myer Berlow, senior vice president
of interactive marketing at America
Online
. “It’s really in response to our effort to create a business
model that is a win-win for both sides,” he was quoted as saying.


Not everyone, however, is sold. Most content providers have been reluctant
to take responsibility for so many unknowns. What if an advertiser’s ad is
not compelling, for example, or its prices not competitive? What happens
when the server at an online store gets swamped or its secure ordering is
too complicated? “It’s really troubling to some new media companies because
it puts all the risk on them,” LeFurgy said.


More details on the topic are available online.

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