Online Lead Generation - Online Advertising

Online Advertising

There are three main pricing models in the online advertising market that marketers can use to buy advertising and generate leads:

• Cost per thousand also known as cost per mille (CPM), uses pricing models that charge advertisers for impressions — i.e. the number of times people view an advertisement. Display advertising is commonly sold on a CPM pricing model. The problem with CPM advertising is that advertisers are charged even if the target audience does not click on (or even view) the advertisement.

• Cost per click advertising overcomes this problem by charging advertisers only when the consumer clicks on the advertisement. However, due to increased competition, search keywords have become very expensive. A 2007 Doubleclick Performics Search trends report shows that there were nearly six times as many keywords with a cost per click (CPC) of more than $1 in January 2007 than the prior year. The cost per keyword increased by 33% and the cost per click rose by as much as 55%.

• Cost per action advertising addresses the risk of CPM and CPC advertising by charging only by the lead. Like CPC, the price per lead can be bid up by demand. Also, like CPC, there are ways in which providers can commit fraud by manufacturing leads or blending one source of lead with another (example: search-driven leads with co-registration leads) to generate higher profits. For such marketers looking to pay only for specific actions, there are two options: CPL advertising (or online lead generation) and CPA advertising (also referred to as affiliate marketing). In CPL campaigns, advertisers pay for an interested lead — i.e. the contact information of a person interested in the advertiser's product or service. CPL campaigns are suitable for brand marketers and direct response marketers looking to engage consumers at multiple touchpoints — by building a newsletter list, community site, reward program or member acquisition program. In CPA campaigns, the advertiser typically pays for a completed sale involving a credit card transaction.

Recently, there has been a rapid increase in online lead generation: banner and direct response advertising that works off a CPL pricing model. In a pay-per-action pricing model, advertisers pay only for qualified leads resulting from those actions, irrespective of the clicks or impressions that went into generating the lead. PPA advertising is playing an active role in online lead generation.

PPA pricing models are more advertiser-friendly as they a less susceptible to fraud and bots. With pay per click providers can commit fraud by manufacturing leads or blending one source of lead with another (example: search-driven leads with co-registration leads) to generate higher profits for themselves.

It also helps explain why 2007 saw a paradigm shift for the industry, with spending on performance-based pricing models exceeding that on display (IAB PWC 2007 Internet Spending Report) for the first time.

A GP Bullhound research report stated that the online lead generation was growing at 71% YTY — more than twice as fast as the online advertising market. The rapid growth is primarily driven by the advertiser demand for ROI focused marketing, a trend that is expected to accelerate during a recession.

Common types of opt-in ad units include:

• Co-registration advertising: The advertiser receives some or all of the standard fields collected by a site during the site's registration process.
• Full page lead generation: The advertiser's offer appears as a full page ad in an HTML format with relevant text and graphics. The advertiser receives the standard fields and answers to as many as twenty custom questions that s/he defines.
• Online surveys: Consumers are asked to complete a survey, including their demographic information and product and lifestyle interests. This information is used as a sales lead for advertisers, who purchase the consumer's information. The consumer has 'opted-in' to receive correspondence from the advertiser and is therefore considered a qualified lead.