For obvious reasons, I’ve been working hard to make sense of the value created by the current crop of dotcoms, and their attractiveness to large Internet companies. Yahoo, News Corp., and the rest are out shopping for profile sites and similar assets. I don’t have access to Yahoo’s strategy docs, but my guess is that the key execs believe that cost-per-acquisition (CPA) advertising will be much bigger than cost-per-click (CPC). If that’s their view, it’s one that I support, and the problem quickly turns to inventory.
No one really knows what a CPA network will look like, but large companies will fight to have a large inventory footprint within it from the moment it hits critical mass. When AdSense for Content started paying out in Q2 2003, the big content players were all caught flat-footed. They didn’t own SEO‘d inventory; they didn’t predict SEO methods; and they took years to respond. A bunch of us little guys jumped up and started a million specialty sites that built Google’s business and got us paid. About.com is the poster child for this phenomenon. The little guy may do great a second time with CPA, but the larger companies are doing what they can to capture more of the cash for themselves.
As far as anyone can tell sitting here in January 2007, CPA network inventory consists of profiles, particularly social profiles where the user’s context is as explicit as their email address. Lead generation systems are fine as far as they go, but it is far more valuable to understand what music you like and who you share it with on Last.fm than the fact that you want a Free iPod. That’s why the biggest Intenet companies are buying up the social sites that act as efficient profile creation engines — particularly ones focused on shared media.
The next year or so will be fascinating as startups crank out high-quality, moderate-scale profile sites by the dozen. MyBlogLog’s engineers did a beautiful job reducing the mechanism to its essence. These valuable little sites only have three significant pages:
MyBlogLog correlates what pages users view and links we click on, which is one of the largest possible opportunities, but there are literally thousands of others. Which five of them do you know how to build to get in early on the CPA revolution?
Up Next: Tired — SEO ||| Wired — SMO
scott: why do you think CPA inventory is likely to be different/better than CPC inventory? wouldn’t a page that employs CPC generate as much / more dollars if it were setup for CPA? (assuming it’s not optimized for click-fraud
or are you just saying that social media profiles proxy for data on what someone is interested in / likely to buy?
seems to me CPA is more about optimizing for pricing / conversion than the actual page content, but maybe i’m not getting your point…
- dave mcclure
Hi Dave, Sorry I took a while in responding.
Like CPC took a bite out of CPM but didn’t kill it, and like TV Killed the Radio Star but not radio, CPC isn’t going away. It will be relegated to lower margin inventory, pushed down the food chain like all mature technologies.
I am exactly saying that “saying that social media profiles proxy for data on what someone is interested in / likely to buy,” but I don’t think that “just” has anything to do with it. The move from CPM to CPC to CPA is based on the transference of risk from the advertiser to the publisher. The publishers who do well will place CPA ads on pages where they are well matched to users known, and likely explicit, preferences. They’ll stick with CPC/CPM elsewhere. Those user preferences come from the combination of social profiles I create with the ones I peruse.
Publishers will also be inserting my profile many of the pages I see, far more explicitly than is done today — where does the MyBlogLog widget go over time? For a particular buying mindset, if you have my profile, you have the XML componentry that will follow me around the web, mashing up with the pages I look at, effectively authoring the pages on which CPA offers show up. Profiles of me and my “friends” become inventory that follow me around rather than inventory I show up at.
Thanks for pushing me on it.
[...] One reason that I didn’t mind selling MBL so early was that I had no concrete idea how we’d make money. I might now. The lessons I’ve learned at least mean that one post, Inventory for CPA Ad Networks, has completely the wrong premise. The post discusses social profiles as if they will become high-value pages (measured by eCPM) on which to put ads. They aren’t high-value now, and they won’t be in the foreseeable future. They’ll remain below $0.20 eCPM. Beyond just the profiles, the huge majority of pages on social network sites don’t and won’t do any better. The exceptions to that rule are passion-centric communities like Dogster, single-topic social applications like many Lookery publishers, and vertical content aggregations like Fotolog Groups. A few of these exceptions (notably, travel pages) can be worth $2 and higher eCPM but the vast majority are in the $0.20 to $0.50 range. [...]
[...] One reason that I didn’t mind selling MBL so early was that I had no concrete idea how we’d make money. I might now. The lessons I’ve learned at least mean that one post, Inventory for CPA Ad Networks, has completely the wrong premise. The post discusses social profiles as if they will become high-value pages (measured by eCPM) on which to put ads. They aren’t high-value now, and they won’t be in the foreseeable future. They’ll remain below $0.20 eCPM. Beyond just the profiles, the huge majority of pages on social network sites don’t and won’t do any better. The exceptions to that rule are passion-centric communities like Dogster, single-topic social applications like many Lookery publishers, and vertical content aggregations like Fotolog Groups. A few of these exceptions (notably, travel pages) can be worth $2 and higher eCPM but the vast majority are in the $0.20 to $0.50 range. [...]
[...] One reason that I didn’t mind selling MBL so early was that I had no concrete idea how we’d make money. I might now. The lessons I’ve learned at least mean that one post, Inventory for CPA Ad Networks, has completely the wrong premise. The post discusses social profiles as if they will become high-value pages (measured by eCPM) on which to put ads. They aren’t high-value now, and they won’t be in the foreseeable future. They’ll remain below $0.20 eCPM. Beyond just the profiles, the huge majority of pages on social network sites don’t and won’t do any better. The exceptions to that rule are passion-centric communities like Dogster, single-topic social applications like many Lookery publishers, and vertical content aggregations like Fotolog Groups. A few of these exceptions (notably, travel pages) can be worth $2 and higher eCPM but the vast majority are in the $0.20 to $0.50 range. [...]