Efficient Ad Models

17 03 2007

Everyone has their take on efficient ad models.

Seth Godin has an interesting, if a little odd, take on the advertising model.  On first glance, it looks like affirmation of why he  is considered one of the most brilliant marketing minds out there.  He’s combined fixed ad placement pricing and Digg-style voting to dictate rankings and reward good offers.

If you thought click fraud was a problem, push in voting fraud and the skeptics are going to have a field day.  Gaming the system in a transparent voting system means that it’s a perpetual cycle – fraud rankings can lead to more upward votes that are actually legit!

SquidOffers right now looks like a paid Digg.  You pay an entrance fee for the right to be a part of this Digg.  It is a neat way to monetize a previously invented system.

I honestly don’t believe AdWords is broken.  Seth says that you are penalized for writing ads that work, but if you’re paying an appropriate amount for clicks – you do want that additional traffic.  Pay-per-click: you know it’s response advertising and you pay more when you get more responses.

Right now, the SquidOffers system is fixed pricing.  Make this an auction or offer-based system and you’re coming closer to a more efficient market.  Fixed pricing works, but only if you price below the market.  Price over the market and even offers that do well won’t see the value.  It’s admirable that Squidoo puts relevancy above profits.  For an ad model, this does effectively mean that you’re leaving money on the table.  Again, fine and well if you want a monetized Digg, but not if you are really looking for an efficient and effective ad market that properly rewards content creators.

Google’s cornered the pay-per-click model.  In reality, the only reason why PPC is all the rage now is that clicks is what Google is good at.  A search engine is all about clicks – it uses the relevancy ranking to control how many clicks your ad gets.  It has absolutely no control after the click, so it’s charging up to the performance metric that it has any control over.

A fully efficient ad model combines market-driven pricing and pays publishers for performance up until the point that the publisher has no more control over performance.

So what’s the most efficient ad model?

  • Awareness = Impressions
  • Prospects = Pay-per-click, pay-per-call, pay-per-lead (to a certain extent)
  • Customers/Users = Pay-per-sale, pay-per-signup

How do we get to a more perfect market?  I think the only way this gets better, as it’s pretty good right now, is when platforms continue to push towards affecting the final conversion to a user/customer (maybe even loyal user and loyal customer?).  You’re seeing just the beginning of it as Google makes its way into the commerce world.

eBay is a marketing platform as well – it’s just the best know platform of pushing up towards the exact performance metric that matters.  On iLetYou, we have some control over how well our stores perform in real revenue.  Thus, we push our pay-for-performance model to the point of sale/rental because that will eventually be the most efficient model for everyone.

Thoughts on efficient ad models?  Share them here because this is one time I really with Seth’s blog allowed comments to see everyone weigh in…




3 responses

21 03 2007
Terrence Tully

What do you think about Googles new idea for CPA?

21 03 2007

Hi Terence,

Good timing, huh? From the perspective of efficient ad models, it’s great for advertisers. Whether PPA works within Google search- it’s probably a mixed bag. Google has little or no control over the end conversion so PPC is probably the overall most efficient medium for the search engine like I mentioned.

I’ve written a blog post on my predictions for Google PPA advertising:


15 12 2007

very interesting, but I don’t agree with you

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