Performance Based Marketing is the Future!

Performance based marketing is the future. Those individuals, who have been involved with online marketing, have seen a distinct evolution occurring within the space. When Internet advertising began to take off in the middle 1990’s, the advertising format consisted, primarily of the banner ad format. Pricing was based on an impression basis. This meant that every time the advertisement was viewed by a visitor, the advertiser was charged. However, this ad format would, quickly, find new competition.

In the late 90's, search marketing came onto the scene. With search marketing, advertisers were no longer charged for each person, viewed the ad. They were now charged, based on every person clicking the ad. This change in buying model was what led to the advent of performance based marketing. It is the primary reason why performance based marketing is the future.

Search marketing also brought on a change in dynamics between the publisher and the advertiser. Originally, with CPM or cost per impression advertising, the risk of campaign performance, exclusively, fell onto the shoulders of the advertiser. It was the advertiser’s job to garner visitor engagement through clicks and on site conversions. The only obligation publishers had was to serve up the advertisement to the intended audience.

When the famed "dot com" bust occurred, in mid-2000, publishers found themselves with billions and billions of unsold advertising impressions. In industry terms, this was called a low "fill rate". Until that time, publishers had refused to enter into any performance based deals. Now, with a burgeoning base of unsold inventory, publishers became receptive to taking on more risk. For the search engines and their cost per click model, this was a boon. As a result, search engine advertising exploded. It now represents a significant portion of online advertising.

As the recession deepened in 2002 and 2003, a new advertising model emerged. This new model was called “cost per action” or CPA. As the name implies, it means that the advertiser will only pay the publisher when the visitor took a specific action. This action could be the completion of a newsletter registration, a purchase, a request for product information or survey. With the emergence of the CPA model, risk shifted entirely to the publisher. If the visitor did not perform the action, the publisher would not get paid. On the flip side, a publisher could drop an advertising campaign, if it did not perform well. This model forced the publisher and advertiser to become true partners, aligned toward a common goal. It is this partnership, which is the reason why performance based marketing is the future.

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