Is the ad market moving to a CPA model?

RWW publishes an interview with Highland Capital’s Richard De Silva.

Richard essentially makes the point that everytime there is an economic downturn, advertisers want better performance for their their ad spend. The first move was from CPM to CPC, the second, he claims, will be to CPA. Some

Then he goes on to say that to actually track acquisitions you need to put implants into humans, invalidating the first point. There are, of course, other ways. aQuantive, before getting gobbled up by Microsoft, did a lot of work correlating actual offline sales with online ad campaigns, compensating for the last click syndrome, and weighing in the value of various consumer interactions in the end result. At Cossette we’ve done that as well over the years, but many other opportunities exist.

One of the things that fascinates me is that in 2009, pick-up-in-store still hasn’t taken off. To me it seems like a killer app for all things retail, yet (especially in Canada) this is still almost non-existant. How often did it happen to you to stumble upon a brand/product online, check out the price on retailer’s site — and then go to store and buy it? Imagine if there was a coupon thrown in too, making it that much tempting. Coupons by themselves, of course, are another way of tracking offline sales. Granted, the overwhelming majority of conversions from brand advertising are more latent and my examples are borderline DR, but I’d still be interested to analyse pick-up-in-store transactions with respect to their users’ previous interactions with ads and the brand online.

This sort of initiative would help brand advertisers make forays into CPA-based advertising, but without it the economic incentive for publishers is simply not there. The new crop of behavioural and data exchanges (bk et al) will be of great help to facilitate the CPA model.

Let’s not forget that, if brand advertisers could measure their CPA themselves, they could already convert their CPM rates to their CPA metrics. And they could already negotiate down their CPM rates to match an acceptable cost per acquisition.

The problem is thus not with the compensation model, but strictly with the (im)possibility of measurement. And as long as that’s not resolved, publishers wouldn’t be able to readily accept CPA.

What we’ll see in this recession is not a move from CPC to CPA, but a drop in CPM rates and maybe a drop in CPC rates if things get really bad.

King Kong formats are here to stay

27 large publishers, including NYT, Forbes, and ESPN have announced that they’re replacing the traditional IAB ad formats by bigger, shinier ones.

This doesn’t seem to be an IAB initiative in the least, rather more of an OPA thing. Considering that this comes right after Vivaki spearheaded the video formats makeover as recently as this past January, this is worrysome. IAB has its place but needs to be agile enough to allow for innovation.

The fact that, collectively, these 27 publishers represent over 100mm uniques is important because top agencies will be more likely to develop creative only in these new formats. Which will let other publishers feel left out unless they also own up to the new king kong formats. In other words, there is a very strong possibility that many more publishers will have to update their layouts if they want a piece of big advertisers’ campaigns.

Given the recession and advertisers’ tightening their purses, we’re seeing two massive trends in display advertising, both working concurrently to justify premiums publishers have gotten used to over the past years. The first one, as it’s getting clear now, is king kong formats. The second is data portability, with companies like Bluekai and Lookery specializing in data collection and allowing ad networks and publishers to target and report on a much deeper level. But no matter how clever you are with your targeting, if ads are ignored or barely visible, it’s a waste.

That is why the rapidity of adoption of new formats will likely be very similar to Bluekai’s growth curve.

Edit: reactions from Thane Calder on cloudraker’s blog and Yannick Manuri on espresso

Of Skittles And Men

A lot of talk today about the new Skittles.com (spoiler alert: it’s a continuous twitter search for “Skittles”). Some say that it’s the future of advertising for CPG companies, as mentioned in Brian Morrissey’s post. Others don’t care.

This is a cool idea that will generate quite a lot of buzz. It perfectly represents what modern online marketing has become: trend surfing, launching the next neat tech thing that the industry talks about. The twitterati (and scary marketing types) will post and repost it. And that will generate better results than the conventional loop of creating a dull site that no one cares about, where you desperately try to drive traffic to justify the extravagant development costs.

The big question I have is whether Twitter got paid for this and whether this makes it a media company, at last. Personally I gotta say that I do appreciate the self-depricating tone with “interweb” and “gobbledygook”. For a CPG company that’s reaching out to the masses, right there.