Bridging Interests

In almost every instance, changes to Google’s quality score mean the company makes more money. As we discuss in our piece on the topic, this holds true in the most recent change from static to real-time quality score determination. It’s not unreasonable to think that somewhere in Google headquarters, they have meetings on what changes they can make to the AdWords system that will make them more money without altering the user experience. When they find something, and when it involves a large enough change, they then post what changes they have made on their blog and talk about it in terms of quality and performing better. Unlike other companies, though, when Google discusses better performance, they do so leaving out how they might benefit, as though the impetus for the change came only out of their concern for the advertisers and the users. Analyzing the changes, though, we see that “perform better” for Google functional involves the same two things that perform better means for any company who makes money from a performance-based model – higher conversions and/or advertisers paying more for the same traffic. Only occasionally will the changes (potentially) reduce short-term performance for Google, such as when they modified their mobile subscription marketing policy, i.e. Google will make a change that reduces their yield in the short-term. When they do that, it’s to protect their longer term interest – expanding market share, as a gain in click revenue isn’t worth a loss in life-time value for their users. Even then though, chances are they tweak their algorithm not in a reactionary matter, but only after they can comfortably predict no real loss in revenue, being able to fill the now-banned ads with ones that will perform the same overall.

With Google, we have a potential chicken and the egg scenario when trying to understand quality score changes – whether perform better (higher conversions and higher cpc’s) drives the constant tweaking, or perform better acts as the bar for whether a change gets pushed live or not. Only the insiders at Google will know, but thinking about who benefits and why and how they manage the various parties interests helps us analyze some of the issues we face in our world of performance-based advertising. Regardless of what really brings about the changes, Google can slough off cynics because of the benchmark they use – the user experience. Even making money drives everything they do, because the user experience doesn’t decrease, they can always say that money doesn’t drive them. Let’s be honest, money definitely drives our world. Google gets paid per click, not per action, so the risk they take is buffered by the advertiser. That simply isn’t the case in our world. We get paid when conversions take place and only when conversions take place. Drive as many clicks as you want, it doesn’t mean anything if people don’t fill out the forms. As an advertiser, paying only for conversions doesn’t sound bad, but it’s a double-edged sword, because it doesn’t automatically align interests, especially when initial conversion doesn’t necessarily make the advertiser money. It’s a fair trade when working with publishers / networks – each taking some element of risk – but it still creates a gap. Dating sites are a great example.

In dating, the advertiser pays out on a per lead basis. As is the case with most true lead generation, the creation of the lead doesn’t make the advertiser any money. In the dating world, the leading online companies that leverage performance-based marketing channels, pay out when a user completes a certain amount of the profile process, generally very basic information, taking little time from them but yielding comparatively high payouts to the publisher. The dating site though only makes money when a user goes the next step and becomes a paying member. Success for an advertiser then involves strength in multiple disciplines – first creating a compelling proposition to the user so that they will begin the sign-up process, then becoming masters of the upsell to have as large of a percentage as possible becoming paying members, and finally, keeping them paying members for as long as possible to maximize lifetime value, all while understanding the nature of publisher-based performance-marketing so that they can pay as much as possible per lead to gain as much publisher market share. That’s a lot to do. And it’s no different for the publishers who take the principal risk for media cost to generate the leads.

Ideally, what converts for the publisher will also yield revenue for the end advertiser, but often this doesn’t happen, as is the case with certain search terms. Dating advertisers receive a substantial amount of traffic from ‘chat’ related keywords, but those visitors coming from chat, while they might generate leads, they don’t generate sales. Publishers, on the other hand like ‘chat’ keywords because they generate a lot of revenue for them. It’s in their best interest to keep running there avoiding the terms that produce a limited number of leads. The best advertisers see this gap and work proactively to try and convert chat traffic while others lower payouts to try and limit it. Others simply pay on a subscription to guarantee interest alignment with the least amount of work. Even then, we have a scenario, where it works for one party more than another. In an ideal world what the advertiser needs and what converts for the publisher are the same, but it’s much harder than it seems. This isn’t a uniquely advertiser-centric problem, though. In social media, for example, many networks run offers that they would prefer not to, but feel they must in order to remain competitive. The crush offers are the epitome of this; social ad networks loath these offers, but feel they must run them if they want to keep publishers, all while risking users leaving the apps they monetize. In all of this discussion on performance, though, all too often talk of right by the user doesn’t exist. Performance-marketing nirvana involves publisher yield (high RPM/eCPM), advertiser ROI (sales not just leads), and consumer value. That’s hard to find. When we leave out the last piece, we face others making rules for us, e.g. Google, or Facebook banning certain offers. If we can keep the last piece in mind, we’re free to make as much money as we want, and we probably will in the longer run (ala Google). It’s a race to make enough in the short-term while not screwing the opportunity in the long-term.