A Survival Guide For Networks

Cost-per-action networks are all the rage today. But what will it take for a network to win with 400-plus competitors? And how does a network keep ahead of the curve (and the FTC) while building its publisher and advertiser base and fending off tracking and fraud issues?

These are the tough questions that CPA networks face.

It might just be me, but I’ve always felt that CPA performance marketing (or as the Madison Ave. types refer to it, the pay-for-performance model) is one of the best ways the Internet can connect and engage the target customer for less than other channels – a lot less. Further, it can convert them into buyers, or at the very least, generate some measureable brand awareness.

But this promise comes with a need for tracking solutions that allow advertisers to assess on a micro level the quality of the traffic sources on which their campaigns were placed.

I spoke with my old friend and industry veteran Todd Crawford recently, and he made the same observation: “The CPA space needs to legitimize itself in order to see larger advertisers and their larger budgets shift to the performance model.” For the last 12 years, I have watched the online advertising community mature, and have always been involved in affiliate marketing. But the current players in the CPA network distribution channel need to ask themselves where they see the industry in two, five or even 10 years.

There’s no doubt there will be a shakeup, or more aptly put, a shakeout, in the CPA sector of Internet marketing within two years. With 400-plus networks (thanks to DirectTrack and other platforms that have allowed almost anyone to start their own network) all competing for their fair share of online publishers, what will it take for networks to distinguish themselves and stay standing after the dust settles?

Here are a few guideposts on which nearly all the players seem to agree.

1. Address Fraud Issues
Fraudulent transactions constitute the No. 1 complaint among networks. While some platforms do an OK job of trying to identify fraud, it is ultimately the network that needs to be proactive in spotting trends early and monitoring their advertiser’s channel sales. There will soon be a suite of products and services that will begin to set new standards, and the networks that embrace them will experience greater loyalty from both publishers and advertisers.

Lead-generation fraud is another area that will seriously decrease the move to online performance marketing by bigger advertisers. Lead gen is the logical starting point for most big brands as they experiment with social media and other outlets where they can establish a one-to-one relationship with their brand-loyal consumer. But fraudulent leads gone unchecked will destroy the ROI or branding goals of the campaign. Networks offering lead-verification services will be better off with larger brand advertisers and their agencies.

Publisher application fraud is the final puzzle piece in fraud and also one of the most costly in terms of networks’ time. Most large CPA networks get hundreds of publisher applications daily. Screening out fraudulent applications is tedious and necessary. Because publishers themselves will more than likely never band together as a whole to screen themselves, additional network standards and negative databases (like those used for SPAM) applied across all networks would be at least a first step.

However, as with anything, most solutions that include blacklists or certifications can be gamed or hacked. The message here, if you are a publisher, clean up your act and make sure networks can verify your identity and your traffic. Network screening procedures will tighten up. Those networks that admit anyone and everyone will be the earliest to exit in the shakeout.

2. Exclusive Advertisers
Networks whose existence relies only on cross-published campaigns or “brokers” to bring them campaigns will find themselves being left behind. Agency-of-record advertisers for a network are their lifeline to healthier margins and increased budgets for campaigns.

CPA Networks have the potential to be the online advertising agency model for the future. The best networks add value to both their publishers and advertisers by understanding the space and how to best enable all parties to capitalize on unique capabilities and returns. In essence, that’s the same benefit most Madison Avenue. shops were supposed to follow with traditional media companies.

CPA networks are the new agencies for online advertising, because they have in many cases cut out the “media companies” and are better able to connect brands, products and services directly with the target audience through their publishers’ traffic. Networks that realize and capitalize on this opportunity also will be targets for acquisition.

As the bubble of CPA networks grows, here’s a plan to help publishers survive the inevitable shakeout.
 

3. Niche Yourself
Networks that niche themselves around a vertical have better loyalty than the everything-and-the-kitchensink networks. Networks that have established themselves in a vertical will tend to polarize the larger publishers in that niche. This in turn will attract advertisers that want to reach those visitors.

CPA network publishers are mercenaries by the nature of the game, but as this model matures and the fraud and tracking issues are sorted out, publishers will exhibit greater loyalty to those niched networks where they know they can get the highest payout because the network deals with the advertiser exclusively.

I am sure there are many other factors that will contribute to the survival of a CPA network in the coming years. This is a relatively young business model that is evolving constantly with new horizons such as mobile, social networks and online video.

The networks that continue to add value to both sides of the equation will win, because they will no longer be the middleman, but a vital and necessary part of the process of making money online.