Will Paid Search Go The Way of CPA?

by Aaron Goldman, VP Marketing & Strategic Partnerships
Appeared in MediaPost's Search Insider

In my last column, I raised the question, “Will CPA Become the Default Pricing Model for Paid Search?” The topic stemmed from a panel I participated in at the recent Digital Media Measurement and Pricing Summit. My first instinct was to write CPA off as nice in theory but “never gonna happen.” In turn, I feared my conference session would turn out to be the “shortest panel ever.”

I’m happy to report that my dialogue with fellow panelist Jason Clement of Neo@Ogilvy was bountiful and we used the entire 45 minutes allotted. However, the net-net as far as CPA goes is that we landed somewhere between “nice in theory” and “never gonna happen.” The responses to my column, both in the Search Insider blog and directly to me via email, also fell in-line with that sentiment.

Would You Like Some Cons With Those Pros?

2 weeks ago, my assessment focused primarily on the benefits of CPA to the search ecosystem, namely:

1. Minimized risk for marketers and elimination of click-fraud

2. More relevant ads and post-click experience for consumers

3. Higher eCPM for search engines

Today I’ll focus on the barriers to adoption of CPA pricing and the potential downside of its widespread implementation.

CPA (Control Preserving Advertisers)

Kaitlyn Smeland posted a well-articulated response to my column over at the Search Marketing Sage Blog. Here’s an excerpt:

“But even beyond website design and usability, there are certain basic marketing elements which will always influence conversion and can only be controlled by the advertiser/client. Pricing, quality, value proposition in the competitive landscape, existing brand equity, inventory management, the security of the checkout process, the length of the form required to register for a newsletter, the product color selection… How could SEM professionals or search engines ever control these variables? And, really, what advertiser would ever put those decisions in anyone else’s hands?”

In the same vein, Tom Pick from KC Associates offered this analogy in the Search Insider blog:

“Asking a search engine to be responsible for CPA is like holding a marketing department responsible for corporate profitability — it just won’t work, as there are too many variables outside direct control.”

Where Are My Learnings?

Another comment in the Search Insider blog highlighted an additional challenge to the perceived value of CPA pricing to marketers. This one came courtesy of Brian Hadley at Cole & Weber United:

“In most CPA arrangements the placements are often blind, and I think that there may be a tremendous loss of information/knowledge on the client/agency end of table. You can lower your risk in the short term, but long term you may end up of losing valuable campaign performance data. More specifically, you may lose the ability to learn how consumers are interacting with media across multiple touch points.”

What’s In It For Me?

Kaitlyn, Tom, and Brian underscore an important point here: In order for search engines to successfully deliver CPA programs, they’ll need to be able to control most, if not all, campaign variables (or at least have visibility into them). Otherwise, they are essentially operating as affiliates — clearly not the business they want to be in, nor where they can provide the most value.

When search engines are tasked with delivering actions, not just clicks, there’s little incentive for them to make available all the learnings that come with running a search campaign. Rather than report on which keywords and creatives are working, it would be in their best interests to keep all that data in a black box to improve their algorithms and, in turn, their margins — just like affiliates.

What’s In A Name?

Using pay-per-click as the model makes it clear what the scope of the work is for search engines — driving traffic to marketers’ Web sites. In this model, marketers take on the risk of converting that traffic. Therefore, they’re entitled to access and control all relevant KPIs pertaining to that click — keywords, copy, bid prices, etc. — and associate them with post-click data to optimize the campaign. As a bonus, they can use those variables to activate and integrate cross-channel marketing efforts.

A shift to CPA means the scope includes action/acquisition, so everything that happens on the SERP and the marketer’s site would fall within the purview of the engines.

CPA? No Way

Tasking the engines with managing the back-end of your campaign is like asking your real estate broker to do your interior design. And giving the engines full visibility into campaign performance is like letting the fox into the henhouse. The result is a dead chicken in an ugly house. And no one wants that mess.