Selling Points: Optimizing E-Commerce

There are several ways for online marketers to advertise, but from a risk/reward standpoint, Cost Per Acquisition (CPA) beats them all. But before I explain why, let’s first examine other online advertising methods and see what they give you for your money from a customer standpoint.

Cost Per Mille (CPM) allows advertisers to pay a set amount for 1,000 impressions of their ad. It might be good for branding, but there’s no guarantee that you will actually acquire a new customer. Besides, unless you’ve paid a higher CPM for placement on a specific Web site or you’ve been guaranteed your ad will be targeted to a specific audience, it’s more or less like throwing spaghetti on a wall to see what sticks. There’s no quality control over who is viewing these ads and no assurance that anyone will actually click on them to see what you’re offering.

We all know Cost Per Click (CPC) advertising works well for Google, but everyone knows that clicks don’t always convert. An advertiser might pay for thousands of clicks before ever making a sale, especially since CPC offers no protection from click-fraud or Web users who accidentally click on the ad and quickly close it out.

The Cost Per Lead (CPL) model is one step up from CPC, with advertisers paying only for customers who click on the ad and submit their contact info. But even though you may acquire customers’ details, you still need to convert them into a paying customer.

All of these methods have something in common: you’re paying for advertising and exposure but not necessarily new customers.

With CPA advertising, you only pay if you acquire a new customer. This cost-effective method gives you all of the branding benefits of CPM, CPC and CPL, but you get countless impressions and clicks absolutely free and only pay when you acquire a new customer that meets your specific requirements. CPA advertising is a high ROI opportunity with little risk and big rewards, which is especially compelling at a time when many online advertising budgets are being cut back due to the struggling economy.

So how can you optimize your ad to ensure the highest conversion rates? I’ll tell you all about it in my next post. Stay tuned.

--Tim Welch
VP of Advertising

With the credit-crisis predicted to cause about 2,000 new-vehicle dealerships across the country to close, one Ford dealership is hoping a compelling purchase incentive will help get buyers behind the wheel of a new car.

Veracom Ford of San Mateo, CA is giving away a free scooter with the purchase of a 2009 Ford F-150. Nearly every dealership out there is offering rock-bottom prices, but there aren’t very many giving away two vehicles for the price of one. A purchase incentive like this may not solve the American auto industry crisis like a good-old government bailout, but it is definitely an inventive way for Ford to stand out at a time when car companies are brutally competing for sales.

--Lisa Contoyannis

Part I: Will Free Content Go Down With It?

The Internet has witnessed the conversion of analog advertising dollars into digital advertising pennies (credit due to Jeff Zucker at NBC for “coining” that metaphor). Despite the fact that a viewer is always just a “click away” on the Internet, online advertisements command only a fraction of the cost of far less measurable media – like print, radio, and television. Consider this: an advertisement on MySpace might cost $.25 to show to 1,000 people ($.25 CPM), versus $25 for 1,000 readers of Time magazine ($25 CPM).

In the good old days of performance-less advertising, engagement didn’t really matter because you generally couldn’t quantify it. Studies on Reach, Frequency, and Recall aside, General Motors had no way of measuring the marginal benefit (much less revenue!) of a particular advertisement. But on the Internet, it is quite clear that if nobody is clicking on your ad, then nobody is noticing it, much less “connecting” with it. Proctor and Gamble has likely spent millions of dollars on Facebook advertisements that attract a few dozen active “followers” – probably the same hit rate they had in Time magazine 20 years ago, but with one key difference: Now anyone can prove that people don’t engage with the advertisement! If only Facebook (and Internet advertising agencies) hid such pitiful data, perhaps the pennies would somehow metastasize back into dollar form. When there’s no way to measure the marginal benefit of an advertising unit, it’s very easy to get ripped off.

Pundits will argue that with increased ad targeting, profiling, and all sorts of other algorithmic alchemy, online ad revenues will be boosted. In my opinion, such talk is nonsense insofar as brand advertising (not direct response) is concerned. Rather, a seismic shift is underway – one that will not only change the nature of advertising, but will also show that the last century of offline advertising witnessed a tremendous amount of money being flushed down the toilet. We are a lot smarter than we were 50 years ago, and those analog dollars really should have been analog pennies all along.

The result of this peculiar wastefulness was (and, for the moment, still is) a “private” consumption tax for the funding of “public” content. If the BBC is funded by the British government (i.e. taxpayers), NBC is funded by Proctor & Gamble, Coca-Cola, General Motors, et al (i.e., consumers of those brands). If you happen to watch your favorite sitcom without transacting with any of those brands, then you are free-riding off of those who do spend – a remarkable corollary to the piracy of paid content. The “free content” system of the past century is no different than forcing people to buy NBC content from iTunes, but instead of the cost being charged to their Visa cards, it is tacked onto the cost of their Tide, Cherry Coke, and Chevy Malibu.

Don’t expect it to last, though. As the brands recognize that they are being bilked – rather, that there is at best a tenuous link between consumption of their goods and consumption of the free content they are sponsoring, they will be less likely to foot the bill. For the beneficiaries of free content, the internet is unraveling this whole ecosystem with unwavering speed.

Stay tuned for Part II…

-- Alex Rampell

It's becoming more and more difficult for retailers to make sales in this economy, much less get a line to form around a store. But early tomorrow morning, hundreds of shoppers will assemble outside of Old Navy stores across the country. Why? The retail giant is offering a compelling purchase incentive: free movie tickets with each $20 purchase.

Old Navy is giving away 1-4 free movie tickets (depending on location) for the first 50-200 people who spend $20. Before the stores open, bracelets good for the movie ticket packets will be distributed to the lucky shoppers already lined up outside—which means a number of locations could experience a Black Friday-esque frenzy with city block-long lines.

Sure, 200 people spending $20 won't come close to the iPhone sales generated by wrap-around lines at Apple stores last summer. But implementing a purchase incentive such as this is a great example of how retailers (online and off) can easily attract a crowd.

--Lisa Contoyannis

While food shopping the other day, I came across an entire display full of restaurant gift cards—Applebee’s, McDonald’s, Red Lobster, Olive Garden, etc.—for sale at, of all places, a grocery store.

Last I checked, grocery stores are the antithesis of the restaurant industry. And here was a grocery store promoting dining establishments—essentially the only businesses that would prevent their customers from buying more groceries.

This is a perfect example of cross-selling. By promoting the products of competing businesses, the grocery store is able to maximize its profits by appealing to every kind of diner. After all, people really only have two choices when it comes to eating: preparing food at home or eating out at restaurants. And this way, the grocery store gets a piece of both.

So how do the restaurants stand to benefit from letting the grocery store take a cut of the gift card sales? They get access to hundreds of hungry shoppers who might not be in the mood to cook after pushing a shopping cart up and down 14 aisles. And I saw first-hand that this advertising strategy works: After snapping a photo of the display with my phone, I overheard a woman say to her husband, “Honey, why don’t we just go out to eat tonight?”

--Melissa Antonelli