TheMarketingSite.com

Knowledge Library

Cost per interaction pricing model might be a dead-end street

Advertising and Promotion

By Richard Mullins, director at Acceleration

Over the past few years, a number of new pricing models have come to the fore for online advertising as publishers and advertisers alike strive to take advantage of the medium's intrinsic measurability.
 
One such model that we're hearing a lot of talk about of late is a cost per interaction model where advertisers pay only for those users that actually interact with their advertisements. It's especially relevant for rich-media ads such as video.
 
It's an appealing model for advertisers since it allows them to pay for the results they get rather than simply paying for access to an audience as they do in the cost per impression (CPM) model that still dominates.
 
However, most large-brand publishers are reluctant to embrace a cost per interaction model, and with good reason. It is not their job to get the audience to engage with an advertiser's creative - it is their job to provide a quality audience for the advertiser to talk to by creating good content.
 
What the advertiser is actually paying for is the right to direct a marketing message at this audience. If the audience chooses not to engage with the advertisement, it might be because the creative was weak or inappropriate for the target audience.
 
In addition, a cost-per-interaction model fails to account for the brand value an advertiser might generate from having its advertisement associated with a premium site that delivers quality content.
 
Of course, there are some publishers that might be open to experimenting with cost-per-interaction offerings - smaller, niche sites that are trying to demonstrate that they have quality users and the ability to handle cutting-edge formats such as video, for example. But established players with premium audiences will be reluctant to devalue their offerings with a cost-per-interaction model, and rightly so.
 
That doesn't mean that cost-per-interaction is an irrelevant metric - just that it is one that the advertiser should try to manage and understand itself. If a campaign is delivering a higher than expected cost-per-interaction, the campaign team can start looking for reasons that the audience isn't interacting with their creative. They can ask themselves whether they're advertising on the wrong sites or whether there is a problem with the creative execution, for example.
 
Knowing your cost-per-interaction will give you an excellent idea of the return on investment (ROI) you're generating from your online advertising spend. To get real ROI from online marketing, you should measure and track your campaign from the user's exposure to your campaign, through to the success event (user buys something, signs up for a newsletter, etc.) and know what you're paying to convert customers.
 
But don't be surprised if your publishing partners are less keen on the cost-per-interaction model than you are. After all, it amounts to asking them to take on responsibility for the performance of your ad when you should be doing so yourself.

 About Acceleration
Acceleration provides unrivalled digital marketing consulting, outsourcing and technology services to clients around the world. We have more than a decade of experience creating customised solutions that optimise digital marketing, automate complex processes, harmonise technology and maximise our clients' return on digital investments.
 
With key offices in London and New York, Acceleration employs expert teams throughout North America, South America, Europe, the Middle East and Africa, and maintains strategic partnerships with industry leaders including Omniture, DoubleClick and Epsilon.
 
For more information, visit www.acceleration.biz

About Richard Mullins
Richard Mullins opened Acceleration's Johannesburg office in 2000.  Richard has played an instrumental role in the growth of Acceleration in South Africa, working with clients to identify their online marketing needs and establish effective online marketing strategies that deliver superior results. This is achieved through the implementation of technology services such as Advertiser and Publisher Ad Operations, Email, Paid Search and Site Analytics.

Share The Knowledge
The Future Of Advertising

Advertising and Promotion

Net#work BBDO and Sinister Studio’s are applying technology to advertising in ways that have never been seen before.

Share The Knowledge
Breaking our attachment to traditional advertising

Advertising and Promotion

The idea that brands are underspending in digital is a common assumption that needs to be tested. Some brands are already spending a huge portion of their marketing budget in digital, and this is growing

Share The Knowledge
Why Ad Blocking Isn’t the End of the World

Advertising and Promotion

The industry as of late has been abuzz with the pending ad blocking apocalypse. Reactions have been mixed: some publishers are indifferent while others think the sky is falling. However, publishers shouldn’t panic just yet. This latest round of ad blocking doesn’t spell the end of the digital advertising world.

Share The Knowledge
Content, Content, Content

Advertising and Promotion

Do people pay attention to ads anymore? I seriously doubt it! We have seen the average click through rates on digital banners decreasing by more than 60% in the past ten years and ever more declining day-after recall rates for TV advertising.

Share The Knowledge
Effective marketing is as simple as EMM

Advertising and Promotion

Effective marketing is becoming more and more of a challenge these days, because the customer is well-informed, interacts through multiple channels, uses their peers as a primary information source and wants the best customer experience possible.

Share The Knowledge