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