Five ways media companies can take advantage of the shift to performance-based advertising

Melissa Chang — Wed, 08 Oct 2008 07:49:43 -0700

Online advertising has come a long way from the days of simple banner advertising. In the past few years, with the rise of search marketing and other forms of measurable media, ad spending has continued to shift from impression to performance-based measurement models.

Performance-based media is a term used to describe any type of advertising program that requires a user to take action in order for the marketer to have to pay for the program. For example, search marketing is performance-based because an advertiser only pays if a user clicks on one of the marketer’s ads. Lead generation is performance-based because marketers only pay for visitor data after the visitor has taken an action or interacted with the advertiser’s content. This is different than impression-based media models, where the marketer paid for the visitor to passively view a Web page that featured one of their ads, whether the visitor viewed or clicked on the ad or not.

As the economic outlook gets bleaker, and marketing budgets continue to tighten, advertisers will continue to put a premium on performance. Media companies will have to respond with a wider range of performance-based advertising programs.

The good news is that this shift will benefit both marketers and media companies. In a time of economic crisis, when confidence is low and money gets tight, companies start slashing budgets and implementing cost-savings measures. Usually one of the first items to get cut is the marketing budget. This is particularly true when the marketing budget is spent on formats that have no measurable ROI. With performance-based media, marketers can see exactly how much each dollar spent is worth in revenue, and companies are much less likely to cut budgets that clearly result in revenue.

As the shift to performance advertising models continues, here are five ways that media companies can get ready to take advantage of this marketing transformation.

1) Implement more robust measurement tools immediately. Most media companies have long since made the switch to at least rudimentary analytics that allow for the measurement of page views and visitors. But with the analytics that are available today, there is a great deal more that media companies can do to provide tracking and ROI data to their advertisers. Google, for example, provides free analytics tools that allow not only the measurement of basic traffic and page view data (impressions), but also the integration with paid search campaigns, goal and conversion data (performance).

2) Use a registration form to "gate" specific premium content areas of the Web site. There is always a great deal of resistance to anything but free content. The argument goes that the Web should be free, content should be free and everyone should be able to access everything on a media site for free. This model worked for media companies in the past as they charged on a page view (impression) basis. With impression-based medial, the more free content a visitor reads, the more page views that are generated, and the more money the media company makes. With the shift to performance-based media, however, impressions are becoming less important as a measurement tool. By gating specific, premium content areas on a Website, media companies will be able to gather important demographic data about its users that it will be able to use to sell performance-based ad programs, including lead generation and targeted email marketing.

3) Review (and adjust, if necessary) the privacy policy. This is an important, and sometimes overlooked, step to being able to move to performance-based formats. Media companies need to amend their privacy policies to give them ability to monetize their consumer data. Many older privacy policies don’t, for example, allow media companies to provide any personally identifiable data to marketers. (This doesn’t, of course, mean that media companies should start spamming their visitors; there must always be an easy way for visitors to opt-out of providing their personal information.)

4) Talk to existing clients to find out what they want to buy. Media companies must have conversations with their existing clients. When the client shifts money to performance-based ad models, what does the client want to buy? Do they want pay per click? Pay per lead? Are they trying to generate an email list? Would they prefer to send e-mail marketing messages through a third-party and get detailed reporting information? There are many different types of performance-based ad models that companies can take advantage of, and media companies need to find out what their clients want.

5) Add measurable advertising offerings to the media line up quickly. Once the first four steps are accomplished, media companies need to add at least one performance-based ad option to their media kits as soon as possible. There is no reason to not take action quickly. If the media company isn’t ready to begin offering an option such as lead generation or search advertising on its own, there are many third-party companies that will partner to offer performance-based advertising on a split-revenue basis.

The shift to performance is already happening. With a little bit of foresight, it’s an advertising shift that will benefit both marketers and media companies alike.

Melissa Chang is the founder of Pure Incubation, an Internet incubator based in the Boston area. She blogs at 16thletter.com.

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