There's a new pretender looking to dent, if not unseat, the current king of internet advertising. From Adweek:
Unlike Google, which charges advertisers on a per-click basis, Turn relies on a cost-per-action scheme. It charges advertisers only if users take desired actions, such as filling out registration forms or closing on sales. (A marketer such as Starwood, for example, could bid $20 for each hotel night booked, $3 for every e-mail sign-up and 75 cents for each site visit.)
In my Unified Field Theory of Advertising, we've been on a long evolutionary march from completely unaccountable analog-style advertising (where and advertiser pays for an impression), towards accountable digital advertising (such as the cost per click, or CPC, model Google employs). The logical extension, then, is the world Turn partly lives in: cost per action (CPA). In other words, the advertiser doesn't pay anything until the action they want is performed.
This will sound familiar to anyone who's been involved in what's called affiliate marketing. Amazon.com's Associates program, for example, offers anyone with a site the ability to earn a commission every time they send a person to Amazon.com and that person buys something within that same session. ValueClick's CommissionJunction subsidiary is one of the bigger guns in this space, operating affiliate marketing programs for a number of third parties, such as eBay, Expedia, and Sony.
Cost per action sounds like the most accountable form of advertising possibe: the marketer doesn't pay unless something they consider valuable actually happens. That has its drawbacks, however. First, advertisers must be trusted to accurately account for conversions (after all, it's in their interest to game the system to show fewer conversions), but there are contractual and technical ways to prevent this kind of fraud. Second, CPA, skewed as it is towards the advertiser, shifts the risk entirely on the publisher; they have to dedicate inventory to an ad that may not perform as the advertiser has defined (ie, a sale, a sign up, etc). The advertiser may gain an impression or even a click-through, but the publisher sees nothing from it.
That may be the primary reason for Turn's interesting mix of blended targeting and effective cost per thousand impressions (effective CPM) in their ad selection engine. TechCrunch describes it about as well as I could:
When visitors come to a site, data about those users, contextual analysis of the site, of the ads and of every ad permutation’s success in that and related sites are all considered in determining each ad’s probability of success. That probability of conversion is then considered relative to the price being paid on a CPA bases. The CPA bid divided by the probability of the action being taken equals an ad’s effective revenue per thousand impressions. And thus an ad is served!
The first set of calculations tries to find the right match of advertisement with site content and visitor profile. From those results, Turn attempts to take some of the risk out of the game for the publisher (while also giving advertisers traffic they value), by placing the ad with the highest effective CPM. That way, they avoid tying up a publisher's inventory with ads with a low probability of conversion. If their data indicates that your site won't send over the kind of traffic that might, say, book a hotel room, but will click through on an ad for travel services, the latter should show as a higher effective CPM even if the revenue per action is a fraction of the first possible ad scenario.
Assuming their algorithms work, that is. Given that Turn is being run by ex-AltaVista executives who did stints at Overture (after Overture bought AltaVista, but before Overture was itself bought by Yahoo!), we can probably assume some genuine understanding of these problems.
VentureBeat is reporting that Turn has raised $18MM from Norwest, Trident, and Shasta.