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Performance-Based Marketing Models

By Chris Wilkinson

A seismic shift is underway in the advertising world, placing more power in the hands of the advertiser.

In the online/digital realms we see an enormous and unprecedented shift of advertising dollars away from other more traditional media. The incumbent “CPM” model (cost per thousand viewers) is giving way to new performance-based models where compensation to publishers is based on the actual success of the advertising campaign.

Under the old CPM model, the advertiser pays a flat rate for a specific amount of exposure to the consumer. Enter the newer performance-based models which can be more effective and more lucrative for both the advertiser and publisher. Standard performance-based models include:

  • CPA- cost-per-acquisition, publisher takes a percentage of the final sale price or fixed price for each sale which occurs as a result of the ad
  • CPL- cost-per-lead, fixed cost per valid, qualified business lead
  • CPC- cost-per-click, a fixed cost per click, indicating pre-qualified traffic

The evolution of performance-based models are forcing publishers in the digital realm to be more selective about their advertisers, resulting in more contextually relevant and appropriate advertising in line with the consumer’s interests.

These models motivate publishers to see their advertisers as partners with a shared risk and reward for success, and ultimately that is a very positive step forward for the advertising industry.

Chris Wilkinson is Managing Director of Los Angeles-based Digital Revenue Partners, which specializes in performance-based marketing and sales strategies bridging the traditional and digital media worlds. He may be reached for comment or business inquiries by email (chris@drp-la.com) or phone (323-892-2256).

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