PPA - Advertisers Are the New Clickfrauders
Here’s the big problem with CPA – it ignores branding. Most ads have a cumulative effect. You see the various Pepsi commercials, their billboards, their sponsored events and eventually an associated image is created in your mind. Publishers appreciate this and that’s why they enjoy and have prospered under a CPC model. Every click is a reinforcement of the branding image a company is trying (or should be trying) to solidify in a consumer’s mind.
Operating on a CPA model is not only difficult to manage, it’s completely forgoes the branding process and only rewards a direct sale. Now a direct sale might have the occasion to occur from a consumer clicking only once on the ad and making a purchase, but chances are the average user has visited the site multiple times, with each visit having a cumulative effect on their buying decision. Is it fair to pay the publisher only for a sale and not for clicks that before that led to it?
PPA providers and advertisers say yes. CPC bids must be smaller than CPA bids. Why? Because there are more clicks than sales.
Assume Google’s conversion rate is about 5%. So out of 100 clicks, there are 5 sales. If each click has a bid of, let’s say $5, then the publisher would earn $500. Therefore, each sale must have a bid of at least $100. Makes sense?
The publisher is being paid the same amount in both models for the same amount of traffic. The advertiser is being charged the same amount as well, and the PPA provider is also earning the same amount. Well. So the PPA pundits would have you believe.
Actually, I foresee it going slightly different. What’s the advantage of a PPA system if all parties are earning/selling exactly the same amount? There wouldn’t be any advantage. Therefore, all parties are not earning/selling the same amount, and the publisher is actually losing revenue while the advertiser is gaining sales and optimizing their ad campaign.
Is the average advertiser going to pay $100 a sale? Is each and every sale coming into their site, where they may have various products and services, worth more than $100? Probably not. PPA bids will be calculated the same way PPC bids are – through an auction. CPA won’t be a function of CPC – they’ll be determined independently.
The publisher is now losing money because:
a) They’re not being paid for all their clicks, just the ones that result in a sale
b) The bid amount for the sales clicks is less than the aggregated amount of all clicks
The advertiser is thrilled because:
a) They needn’t worry about clickfraud eating their budget…for now
b) They spend less on advertising
c) They can calculate their ROI exactly and alter their bids accordingly
So PPA means no branding process and fewer earnings for the publisher. It also means that in the long-run, PPC advertisers will begin to lose money.
Why? Well, what value is it to me, as a publisher, to send traffic and be paid on a CPA basis when a CPM or CPC model brings me higher revenues? You’ll see Affiliate Marketers with good quality traffic eventually start seeking ad servers who offer both CPC and CPA payments so that they can streamline their traffic to the optimal provider. Traffic that converts very well will be sent to the PPA advertisers, while valid clicks that convert less will be sent to the PPC guys.
And, of course, don’t forget clickfraud. What is that phrase – the enemy of my enemy is my friend? What if low-level spammy clickfrauders and high-level publishers begin to join forces in an attempt to subvert the PPA providers? All right, fine, that probably won’t happen. But I guarantee that when giant PPA bids start to be tossed around, there will be an influx of clickfraud in that system.
