Posts Tagged ‘CPA’
Zemanta: Crowd Sourcing Contextual CPA Advertising
Introduction
In my last post, I wrote that CPA needs to be the next revolution in online advertising. I stressed that because CPA is the most efficient pricing method for advertisers, a wide adoption of CPA by publishers will drive the entire online advertising industry forward simply by helping it to gain market share over offline advertising. This is especially true in the current economic downturn, when advertising performance is becoming more and more significant.
I suggested that due to the lack of a scalable system that deploys CPA ads on publishers’ sites in a way that will generate high returns, CPA is therefor not widely adopted by publishers. A lot of innovation is required in order to make it scale.
However, I didn’t suggest any real innovative solution. I still don’t have a suggestion for a solution. But, I think I just found a company that does. Let’s take a look:
Effective CPA Implementation
CPA can be used very effectively as of today, but it doesn’t scale for most publishers. Filling pre-allocated ad spaces with graphical or textual CPA ads, contextual as they may be, simply doesn’t do the trick. Successful CPA publishers will tell you that the highest eCPM is gained when they manually embed a minimal number of text links and banners that link to the single most relevant product, in the right spot within the content.
Any solution for scaling CPA must answer these three questions with great accuracy, for every web page on which it is implemented:
- What product is the most relevant to be sold on the page?
- Where is the best location to link to the product within the content?
- Which linking method is the best for the product?
What product is the most relevant to be sold on the page?
Things that are very obvious to the human mind are not always so obvious to a machine. While a machine may be able to suggest some products after extracting keywords from a given text, it has no way of determining which of those keywords is a relevant product to sell. A machine can’t understand tone, humor and cynicism from the text. It can hardly tell if a product is mentioned in a positive or negative manner. Furthermore, it’s even harder for the machine to name a single product with the best chance of being sold on the web page.
In order for a machine to do all these things, it will need to understand the context of the page. One can suggest that Google does this. After all, they run the best contextual advertising system out there. But even Google is limited. And the fact is, their system is not so contextual.
Google’s alleged contextual abilities are a derivative of its great search technology. Search technology is all about matching search queries to indexed pages and assigning a score to each match. When AdSense ads are embedded on a web page, the relevancy isn’t gained by understanding what the page is about, rather it is achieved through matching ads to pages as if the ads themselves were search queries. That’s about all that Google’s technology does.
In a sense, Google doesn’t try to find the most relevant ads for any web page. On the contrary – it finds the most relevant pages for any given ad.
If Google can’t deliver the most relevant product right away, then there is still work to do. It seems like we need a whole new technology in order find the single most relevant product on a web page, something which is more contextual in its nature, and not based on search technology.
Where is the best location to link to the product within the content?
Let’s say we have a machine that understands what product to link to. Now, where should it embed the link? It’s a difficult decision for a machine, even harder than finding the relevant product itself.
It’s one thing to match ads to web pages (or web pages to ads) and fill pre-allocated ad spaces, but it’s another thing to actually allocate the ad space based on context. And we pretty much understand by now that even Google can’t do this.
This challenge doesn’t stop others from trying. In-text advertising is a somewhat new approach, implemented by companies like VibrantMedia, Kontera and even Amazon. All based on the assumption that a good link from within the content is worth more than a bunch of ads around it. Yet, those companies also don’t have the technology to determine the best spot for the link to be embedded. All they do is turn extracted keywords into links. Those are not necessarily the right words to link, and not necessarily in the right spot. Again, we see that technology can not yet deliver what an advertiser needs, in this case placement.
Which linking method is the best for the product?
Is this a product that requires a visual instead of a text link? And if so, which of the available visuals will perform better? Surely, no machine can provide the answer, yet…
Crowd Sourcing
It seems to me like machine scalable CPA is a romantic idea that belongs to the future. The requirements are just to much for the current technology. Nevertheless, we need a solution now. So what can be done? Crowd sourcing.
If the technology doesn’t exist yet, there is no other way to achieve scalable CPA but to outsource the job to people. This has already been done in other areas of online activity, for example Digg, Delicious and uTest.
How can we use the crowd for contextual CPA? Using Mechanical Turk? Perhaps. However, I believe Zemanta offers a better and more organic way.
Zemanta Crowd Sources Contextual CPA Advertising
Since every page that contains content is generated by humans, what could be more natural than outsourcing the contextual CPA ad embedding to those humans – the authors themselves?
I can think of one problem; authors are not always commercial savvy. They are mostly concerned with writing and not with marketing.
What Zemanta does, however, is provide them with a tool to enrich their content with tags, images, links and more. Zemanta integrates smoothly into the author’s domain and provides them with a great value. What if Zemanta offers some CPA links and banners in addition their other offerings of pictures, links and tags? And what if those links and banners would be seamlessly merged into Zemanta, thus providing a way for the author to integrate CPA in a truly organic fashion?
In an earlier post, I suggested that Zemanta would eventually look for revenue from the point of content consuming, despite that they recently announced a paid API model. Andraz Tori, a co-founder of Zemanta supports my assumption with his comment on CenterNetworks:
But we are definitely working on monetization.
For example when suggest link to Amazon and you specified your Affiliate ID, we insert it. If you haven’t specified it, we insert our own.
Presently, authors from around the world are using Zemanta and organically embedding CPA Amazon ads within their content. They embed ads to the right product, they embed them in the right spots within the content, and they decide whether or not to add a textual link or a product image. Best of all, the authors don’t do it with the intention of selling. They are doing it with the intention of increasing the value of their own content. As a result, ads are organically and naturally embedded within their content.
Of course this is just the tip of the iceberg. Those are just Amazon ads for now, and Zemanta’s method of revenue sharing is not yet solid. However, they have just recently started – and as far as I can see, Zemanta provides a great service, and it’s byproduct is crowd sourcing of contextual CPA advertising.
If that’s not CPA innovation, then what is?
CPA Needs to be the Next Revolution in Online Advertising
Hard Times
The economy is bad. The advertising market is slowing and ad rates are deteriorating . It seems like hard times are upon us. Are they? Maybe. Or maybe it is simply time for innovation.
As far as the online advertising market goes, we must remember that though the market has its own organic growth – which may have slowed down – online advertising is still a part of the whole advertising market. As such, it can generate growth simply by gaining market share over other advertising platforms.
The short nature of human memory makes us forget that online advertising’s ability to gain market share is exactly what drove the industry to its current size in the first place. Online Advertising gained market share over other advertising methods during bad economic times simply due to its ability to demonstrate better measurement and performance. The current slowdown, in my opinion, is a sign of a lack of innovation. This lack of innovation is what stops Online Advertising from growing even further.
Hey, maybe we should embrace the current crisis as a motivator for innovation. What kind of innovation? CPA, if you ask me. And here’s why:
CPM
Let’s begin with a look at the history of online advertising. CPM was the first and most simple pricing model for online advertising. It was a copycat of the traditional offline advertising CPM model, common in TV, printed media, billboards et al. All offline advertising methods price their inventory according to a quality variable (length of the TV ad, square inches of the newspaper ad, location of the billboard) multiplied by the anticipated number of eyeballs it will reach.
And so it was the same thing on the web – only that the web had two advantages over traditional offline CPM. Eyeballs were measured in a more precise way – looking at webserver logs to count an advertisment’s exposures is much more accurate than counting the number of cars going through an intersection at the rush time to assume the daily averages for billboard advertising.
The second advantage online CPM introduced was accurate counting for clicks. For the first time, advertisers could measure engagement through feedback from the target audience. On offline media this kind of data was only achievable using expensive market surveys with questionable results.
Online CPM was one thing that drove the online advertising market to grow. Advertisers eventually realized that they should spend their CPM dollars where they have better accuracy and engagement measurement.
But that wasn’t all.
CPC
The real thing that pushed the market forward was the development of performance advertising. Introduced by Overture in 1998 and perfected by Google a few years later, CPC was something completely different.
For the first time, advertisers could pay just for engagement. Even better, for the first time, advertisers shared the burden of goal achievement with the publisher. Gone were the days of a publisher just allocating the ad space and then forgetting about it. With CPC, publishers were motivated to increase their audience engagement for advertisers. They could change the locations of ads, their appearances, help increase their relevancy by providing keywords and so on. The more the publishers made an effort, the more they earned. A unique cooperation model was born.
Very quickly advertisers realized that CPC helps them achieve their goals. Whether it was sales, sign ups or leads, CPC took them one step closer to success. They could lower their investment in converting views to clicks – that was left for the motivated publishers – and instead concentrate on converting clicks to goals. Performance advertising was born.
More than CPM, CPC significantly drove advertisers to allocate a portion of their budget to online advertising. Additionally, Google’s method enabled small advertisers to join the game. With TV, you couldn’t even think about advertising if you had less than few thousand dollars. On Google, however, you could advertise your product with as little as 5 cents.
Of course CPC has its own problems. First and foremost is click fraud. Second, though it gets advertisers closer to their goals and helps them spend more effectively, it doesn’t bring them directly to achieving their goals the way CPA does.
CPA
CPA dates back to the same time as CPM, 1994. Thanks to Amazon, CPA gained a reputation as an essential part of the company’s growth.
CPA is the best pricing model for advertisers. It provides certainty regarding the future ROI of their whole campaign. It lessens the number of variables that are part of the calculations when determining ROI. When advertisers buy advertising using CPA, they know exactly how what they will recieve for each dollar spent. When they set their CPA rates, they are actually determining their own margins – as simple as that.
CPA is Not Scalable
However, Google and its CPC concept has taken the lead. Not because it was a more effective method, but because it was a scalable method. Compared to Google’s scalable CPC solution, CPA implementation was poor. Why?
The same advantage that CPA holds for advertisers turns out to be a disadvantage for publishers. While advertisers are spared from converting views to clicks to goals, the burden falls on the publishers. And as it turns out, the eCPM that publishers generate from CPA advertising is usually lower than that which is generated by CPM or CPC, hence its narrow adoption – only 7% of the market.
However, when CPA is used effectively, it generates a much higher eCPM than CPC and CPM because it is more effective by nature. When advertisers save $X thanks to CPA, a portion of this $X is passed on to the publisher’s eCPM. In fact, when used effectively CPA is such a powerful revenue generator that an entire mini industry of CPC to CPA arbitraging is prospering.
Yet, what prevents CPA from becoming a commodity for publishers is its scalability. Those who fully utilize it are only small publishers; the ones who can manually optimize their CPA campaigns, a tedious process. Optimizing Google AdSense CPC isn’t such a hassle – Google provides the contextual elements, and publishers can scale location and appearance easily. Scaling CPA in a way that both saves the manual optimization from the publishers and generates a high eCPM is not yet available.
CPA is the Future
We must develop an innovative way to scale CPA. Imagine the possibilities if such a tool existed. If publishers adopt it widely, it could drive more advertisers to use the CPA model. Consequentially, the whole market will act more effectively. Eventually, this will lead to advertisers re-allocating their offline budgets to online, and our industry will be saved!
Is there currently any innovation taking this route? Not really. Google experiments in it, and we could see something robust from them in the future. CPA networks don’t seem to be too innovative, and while there are few startups tackling this model, none of them seem to be revolutionary enough.
However, we are only at the start of tough times. The longer this downturn lasts, the better the chances are to see innovation, especially when the entrepreneurs realize that whoever succeeds to innovate in this market, might as well be the next Google.
Shahar Solomianik 