The Internet has been a hit with the advertisers, and for a multitude of reasons; the favourite being the ability to stay focused and control costs. It is no surprise then that advertisers have swayed away from impression based ads (CPM) in favour of performance based ads (CPC, CPL, CPS).

CPM had been the mainstay of online advertising over the past decade, but it was a sellers/publishers market then and the advertiser had to stay content with the outcome.  Regardless of the performance, the publishers were paid.  Publishers and the media men would sweeten the deal  with metrics that sounded good to the ears – high click through rates (CTR), contextual placing and other interesting jargon, but that still doesn’t address the issue. Advertisers were still shooting arrows in the dark. Some got lucky, got the conversions they wanted and became case studies for publishers, but most of them were languishing with burned fingers.

Enter performance based ads and the dynamics have changed completely. You now pay for performance, which could be for clicks, leads, registrations or what have you. With affiliate networks in the foray, you can also choose to pay only for the sale (CPS). Suddenly the power has shifted to the buyer, which isn’t just good – it’s a resounding Wow!

But all is not well, and this isn’t good for the publishers – for one, they are at the mercy of performance parameters that are arbitrary and two, advertisers can get away with shoddy creatives.
There is an overwhelming pressure on the publisher to perform resulting in burn-outs.
This isn’t good for the online advertising industry in the long run.

The solution is to draw the line and introduce a hybrid solution that is sustainable, an eCPA  perhaps. eCPA or effective Cost Per Acquisition works on the principle of maintaining a certain CPL depending on an agreed CTR; if the average CTR (calculated over a week) dips below the agreed %, the CPL will be raised. This puts the onus on the advertisers to be more creative with their ads, avoid getting repetitive with their themes and perform multivariate analysis on their ads. This will improve the overall CTR and eventually ease the load off the publishers. Publishers, ad networks on the other hand have to be innovative with their ad placements and build more intelligence into their ad serving technology.

In a market that is recovering from the stings of recession, with constraints on the marketing cost, performance will matter – but it shouldn’t come at a cost.