CPA Networks. Good or Bad?
The performance marketing industry has changed dramatically over the past decade, but some things have not changed all that much. It still uses the pixel in order to track conversions. Email marketing still plays a large role in the overall revenue picture, publishers still rely on the networks for their offers, and despite the proliferation in the quantity of cpa networks, some of the biggest from years ago remain the go to players of today. The two largest cpa networks have both changed their names to accommodate the demands of the broader market, namely that the seriousness of name correlates with likelihood of long-term success and value.
In a business that has little switching costs, owns almost none of its inventory, and often has few truly exclusive offers, that a company can maintain its leadership position year after year is no small feat. Despite usually having some star tech talent, these are not technology businesses; they are primarily relationship ones. They are also financial ones as well, providing operational capital to small businesses who cannot either take the payment risk from the advertiser or wait 30 plus days after the end of the month to get paid.
That CPA networks play a vital role in the performance marketing ecosystem speaks for itself, but are they actually good for space? One marketer that I know says something to the effect of, "When a network starts pushing an offer in a vertical that I run, I start to consider getting out of that vertical." Taken one way, it could read as though the person doesn't want the competition, and who knows maybe that is ultimately the pain point. But, ostensibly, their point had less to do with perceived competition and more to do with what happens when they focus their attention on a sector - it usually goes away. Ringtones? Decimated. Nutraceuticals? Destroyed. Google Adwords? Not a big fan. The list of verticals and traffic segments that performance marketers have torn through goes on and on.
What are we talking about?
Performance marketing is a broad term. Network is a broad term. Here's how I use them.
- Performance Marketing - generally used to refer to the ad ecosystem that measures success based on conversions, with the most popular types of conversions or actions being downloads (for toolbars), PIN submits (mobile subscription campaigns), credit-card based free trial signups, and to some extent, leads.
- CPA Network - companies that sit between advertisers and publishers specializing almost exclusively on the performance marketing space; these are companies that are media type agnostic, and as mentioned above focus primarily on facilitating tracking and payments, enabling their publishers to succeed with information sharing, light design work, and finding those campaigns that publishers can best arbitrage.
- Affiliate Network - companies that operate similarly to CPA networks in that they focus on cost per action advertisers. They facilitate those companies who would like to have affiliates and pay for traffic on a performance basis. They differ from CPA networks by working with any client, since they pitch themselves as the technology enabler, making money off setup and minimum monthly fees in addition to the percentage of spend. CPA networks work with fewer advertisers and generally only those with some level of sophistication. The CPA Network earns a greater percentage of its revenue from publishers arbitraging traffic.
Human beings are by and large not just short-term focused but short-term incented. We might know intellectually that we should not get to-go containers because they take up landfill space, but we're in a hurry, so we will do it anyway. We shouldn't make that extra trip in the car because it will add pollutants hurting the environment for our kids. That's ok, we'll make up for next time, which never really happens. This is how we work. Throw in revenue and margin targets, and there is no way that someone incentivized on making money will worry whether this ad might not be right for the long-run or to the letter of the law.
- Worst Practices - CPA networks actively promote the race to the bottom. They have little reason for wanting to promote best practices, so instead, they share worst practices, i.e. those that make the money. They have compliance teams, but they sit behind a Chinese Wall with account managers hoping that their clients don't land on their radar. The two are anything but proactively working together.
- Nothing Sacred - The benefits of working with networks come at a cost. The more you share as a publisher, the more that will get shared with others. Information is not sacred. And, it's nothing personal or even a deliberate betrayal. It's an alignment issue. Those who work at networks take a portfolio approach to making money. They want all parties that they manage to do well. If it means their top guy might not hit his hypothetical peak but the sum of the others will eclipse that difference, that is what happens.
- Landing Page Factory - Networks have always had creative departments. They are the Swiss Army knife of the company, pitching in however needed to make money. In the past, that generally has focused on creatives, but as the market has changed so too have they. Creative teams now help churn out custom landing pages for publishers who might not have the resources. If you are good at buying traffic but not design, the networks still want that revenue so they will do what it takes. In the vein of nothing being sacred, though, it means that they will look towards those things working for inspiration which is what also what other publishers tell them. And, if there is one thing that other publishers don't mind doing it's borrowing from others regardless of what the owner's think.
CPA Networks: How They Help The Performance Marketing Ecosystem
There are periods of time when CPA networks participate in all of the above. It's what can happen and what has happened when they choose the Dark Side instead of embracing The Force. We need networks, though, and they aren't inherently bad. Here is the glass half-full look at their role in the performance marketing ecosystem.
- Best Practices - Networks have resources that far exceed those of their typical publishers. People often act badly when they don't know what is right, and networks help publishers stay out of trouble by making sure they know what they can and can't do. If there is a new rule, a policy change, or any other piece of critical information, the networks push that out to those with whom they work. They are the clearinghouse for making sure we all comply.
- Locked Vault - As we have said before, the CPA Network space is much more a relationship game than a technology one. And, relationships rely on trust. Networks also know that many offers publishers could get elsewhere, so keeping them loyal relies on partially on the payout du jour. It relies that much more in making sure their relationships believe that networks will do right by them. Right means not violating their trust and protecting secrets.
- Sustainability - Keeping a space thriving takes a lot of work, and much of that work generates immediate returns. While we see networks throwing parties at conferences and putting on contests for their publishers, we don't see the legal bills, the closed door meetings, and veritable lobbying done on behalf of the publishers.
- Protection - Just as publishers rarely see the proactive work done by the networks, they also do not see the reactive work. Hardly any publisher of meaningful volume hasn't either deliberately or inadvertently run afoul and caused some grief for the network. Fans of the movie "Saving Private Ryan" will recall a line that Tom Hanks' character utters about senior officers never complaining down. The same goes here. The networks often shield their publishers, helping them get better without just passing along any heat directly to the publisher.
CPA Networks. Good or Bad? If performance marketing expects to do more than just be one step removed from adult, i.e., to have businesses with substantial enterprise value, that happens only by the networks acting as a force for good. And, being human, we are often optimistic, which is why I choose to believe CPA networks can focus on being good...if for no other reason than their self-interest should align.
