Recently someone asked a question that made me realize that most folks haven’t been around the ‘net as several models for selling advertising were attempted. This primer should help everyone understood all of the terminology that goes into selling advertising.
Let’s start with the word impressions. This is a model of selling advertising where you pay for each person that sees an ad. So in television and radio, they periodically do surveys to try to figure out how many people watch a particular channel at a particular time. The most well-known is probably the Neilson ratings. Then the television and radio stations sell advertising based on how many thousand people are probably watching a particular commercial.
Rates are usually expressed in CPM which stands for Cost Per Thousand. Yes; I and every advertising executive on the planet knows that M isn’t the first letter in thousand, but M is the roman numeral for one thousand. So, if you call a radio station and ask for their rates, they might say that their standard prime-time rate is $10/CPM. That means you will pay 1 cent for each person who hears the ad or $10.00 for every 1,000 people. If you advertise a single commercial during a time when 80,000 people are listening, you would expect to pay $800.
That leads us to one of the current favorite models PPC (or pay-per-click). This trend started when banner advertising was still in it’s hey day and before it was discovered that text ads actually did better than animated graphic ads. It has continued to this day although many networks did ban it because of fraud years ago. Google actually even started out selling by the impression and then converted to selling by the click. However, most of us who went through that transition understand that internally Google is still charging by the impression. The PPC model they show outwardly is really just an illusion, but perhaps that is a topic for another article.
The pay-per-click (PPC) model doesn’t exist outside of the Internet. This is the first and only model that seems to not exist in the offline world. However, if you really analyze it. it does have a corresponding term in the offline world. It should be called a lead. A lead is any time you get someone to raise their hand showing some interest. That is what a click means. They are raising their hand and saying that they are interested. You then show them a page that tries to get them to take a more solid commitment (actually buying or possibly just giving their email address or phone number so they can be contacted at a later time).
Many moved to the PPC model to get rid of the fraud with the impresison model. Of course it didn’t work. It is just as easy to commit fraud with the click model. People being paid to run ads on their site can click on their own ads. They can have friends do it. They can even have robots do it through proxy servers. Clicking an ad is just as easy as hitting the refresh button. The fraud problem hasn’t disappeared. Many affiliate networks used to offer the PPC model, but dropped it years ago due to this fraud problem. Commission Junction is perhaps the largest network to no longer allow PPC. That brings us to the next level in the food chain.
As we have already discussed, a lead is when you get someone to show some interest in your offer. In the off-line world, perhaps you ask them to send a self-addressed, stamped envelope for more information or to calll an 800 number or to visit a web-site. That is a lead. They have viewed your ad (an impression) and then taken some kind of action to show that they are interested. A click is one form of a lead. However, in the online world, we generally call a click a click and don’t call a lead a lead until they give us some contact information. So in the offline world, if someone called an 800 number that would be a lead. However, in the online world, most people don’t think of it as a lead when they just click only when they provide some contact information.
Many affiliate networks (Commission Junction is one) still offer programs where they pay per lead. You place ad code on your site and someone clicks on it. You don’t get paid for that click. But if they click on it and then fill out a form giving their contact information then you get paid. They haven’t actually bought anything, but they did show enough interest to give their name and phone number (for instance) or their name and mailing address or perhaps just their email address. The more contact information, the more valuable a lead is considered.
The person who posted the comment implied that selling leads is one way of dealing with click fraud. Wrong. Of course they eliminate click fraud, but just like clicks elminated impression fraud leads just replace click fraud with lead fraud. It may be a bit more difficult to fill out forms with false information, but the rewards are also higher. If you are being paid 10 cents per click, you would generally be paid $1 per lead. So the extra time to fill out the form is well compensated. Lead fraud exists just as much as click fraud.
That gets to the next term the highest level on the advertising food chain the affiliate program. You are being paid for sales in this model. This model is perhaps the most fraud-free, but we haven’t looked at the other side of the equation yet. Fraud exists on both sides of the equation in all of these shared systems. Let’s look at each of these methods of selling advertising from both sides of the fence.
There is the advertiser and the publisher in any of these systems. The advertiser is the person wanting more sales. The publisher is someone with traffic and wants revenue from that traffic.
With impressions, the advertiser has the least guarantee of anything. They take all of the risk. The publisher promises only that people will hear the ad.
With clicks, the advertiser has at least a guarantee that people will end up on their site (baring 100% fraud in which case they are still guaranteed that at least robots will visit their site). The publisher assumes some of the risk. They now have an incentive to help the advertiser make their ad better so that it gets more clicks. The shared responsibility is at a pretty good balance at this point. It is still the advertisers sole responsibility to turn those clicks into leads or sales (and it is usually the advertiser who should be most qualified at doing this, not the publisher).
With leads, the responsibility shifts very slightly even more toward the publisher. They are now responsible for not only getting the advertisers ad in front of people’s eyeballs and getting them to take the action to click but they are also responsible for getting them to give their contact information.
With sales, the advertiser gives up all responsibilty. It is now the publishers responsibility to actually become the sales person. This can sometimes be difficult because the publisher has no control over the sales page. They have responsibility, but no authority. In this system, fraud is often being committed on the other side. An advertiser can harvest that traffic to a lead form or an untracked alternate payment method or an 800 number and the publisher never gets paid for the untracked sales.
The same can happen with leads of course, but the burden and the elements of fraud slightly shift the other direction.
If you really think it through, all of these methods of selling advertising are really just semantics. Many advertisers and publishers choose one and convert all of the others to that one method for comparison. I mentioned earlier that Google appears to sell traffic by the click, but internally they are really selling impressions. The same is true for many affiliate marketers. They may sign up for CPA programs (where they are paid per click, lead or sale), but internally they are calculating their earnings per impression and adjusting what programs they promote based on that one metric.
Fraud takes place regardless of the model. The majority of that fraud shifts from publisher to advertiser or vice-versa as you move from one model to another, but the actual amount of fraud is a constant.
So how do you decide which model to use when selling advertising? One factor is to protect yourself from that fraud. If you want to sell by sales (just putting up the affiliate link), you will be faced with the very highest amount of fraud from the advertisers as a publisher. You will need to mitigate this as best as you can by choosing the best networks and the most reliable advertisers within that network (the best networks give you a metric for that Clickbank it is gravity Commission Junction, it is CPC). In the end, I don’t recommend it. It is a full time job managing that fraud.
Leads moves back on the food chain in your favor a bit. You can sell leads though one of those affiliate networks or you can do it on your own. If you do it through an affiliate network, you still have all of the same fraud issues from the advertiser side. I don’t recommend that. If you do it on your own, you will have to find buyers for your leads. Currently, this is not the standard method of doing business so those who would be interested in buying leads aren’t doing searches on Google, etc to find publishers. You will need to contact businesses directly. There are many real estate agents, car dealerships, boat and RV dealerships, mortgage lenders and others selling high dollar items that would be very interested in buying your leads, but they won’t come looking for you. You have to call or visit them. I’m not interested in that business model, but it is a very, very lucrative model. If you are interested in getting on the phone or driving to local folks of the above type then by all means investigate this model. I know folks who are bringing in the high 7 figures with this model but they do work an awful lot of hours.
Clicks moves back in the chain even more. People will come to you looking for clicks. However, because the fraud now exists primarily on the publisher side, they will be leary. You will have a very low conversion ratio. However, if you deliver high quality traffic (ie: don’t put their ads on the sites of others and share in the income and don’t tell your customers where they can find their ads and therefore their competitors ads so they can click on them) if you do that, you will have loyal customers for life who will pay for as many quality clicks as you can send them month after month after month for years to come. I still have my first traffic customer from over 6 years ago. I have no doubt that they will remain a customer for as long as I follow that policy of protecting them from click fraud from the publisher side.
Impressions moves even more in your favor and away from advertiser fraud. However, it moves so far away that prospects are so leary they simply will not buy at all unless you are very well known. For instance, http://wwwProBlogger.net (or even I could probably do this on my blog) could potentially sell taffic by the impression. The real estate on known high traffic blogs is valuable enough and they are high enough profile that some advertisers would consider paying by the impression. However, I wouldn’t recommend this in our current market. Selling by the click is as far in the food chain as most potential advertisers are currently willing to go. They are even leary there and would generally prefer moving the other direction along that advertising food chain.