Renting on a Per-Acquisition Basis

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In my past life as a "street address" or "snail mail" list manager, if a list broker on behalf of a publisher offered to mail my list owner's customer list and pay only for new subscribers he added to its rolls, I'd have wondered from what planet he came.


This simply was not done, for many good business reasons. Direct mail response list owners whose files respond well for publishers or catalogers in the direct mail world are rewarded with more orders, reuses and, eventually, blanket or continual orders. They are not dice rollers, and they rarely, if ever, form "alliances." They put their lists up for rental by approved third parties and sell them like fresh tomatoes or zucchini.


There are "net-name" deals in direct mail that allow performance/response, volume and price to affect negotiations. The basic premise of net-name is that mailers do not want to pay for prospect names and addresses they cannot use or that duplicate current customers. List owners, on the other hand, resist the idea of being penalized by mailers by getting paid for fewer records when their lists are producing profitably for them. This line of customer acquisition reasoning and list rental revenue monetization has seeped into the world of e-mail marketing and has given birth to a different animal.


Enter the e-mail list cost-per-acquisition deal. Savvy Web site owners who have rightly perceived an opportunity are capitalizing on the wide-open marketing and sales forces and speed that are induced by the Internet. In a matter of 48 hours, 15,000 new subscribers or "registrants" can be acquired with little or no wasted spending. Site owners and their acquisition people increasingly are seeking opt-in e-mail lists that have some sort of affinity with their customer base and that offer to charge based either on response (click throughs) or, more often, on completed registrations to their site.


The interesting aspect of these arrangements is that the buyer and supplier both have a vested interest in the success of the campaign. This can and should produce creativity from both that can be educational and rewarding beyond just dollars. Creative text and HTML messages, as well as timing of delivery, can be tested.


More can be learned about lists and messages that respond well and those that don't.


The prices paid in this arena range from $1 per registrant to upward of $40. Many factors affect the prices and, more importantly, the likelihood of response or conversion. For instance, a Web site with a long-winded registration will pay a much higher CPA rate than will a site with a shorter and easier registration page.


Permission-based e-mail list owners are confronted with a proposition that has interesting features. If they allow e-mailers or other sites to pay based on response/conversion, they run the risk of corrupting their pricing integrity and worse, realizing only a fraction of the revenue they otherwise would receive if they were paid their stated cost-per-thousand pricing. Conversely, if an owner has a large file, say 1 million opt ins, it very likely could realize very sizable revenue -- revenue it might not get otherwise or perhaps as frequently. It is not every day that e-mail list owners get a 1-million-name e-mail address order. Add to that the revenue hungriness of many Web sites, and you have all the ingredients for interesting deal-making.


Successful and well-funded or profitable Web sites are in a strong position to demand a healthy CPM for their own permission-based list. They also can use their weight to shop for CPA deals instead of paying an upfront CPM to acquire registrants, members and customers.


Web sites that are newer or struggling to get a foothold in a vertical market or "space" are more inclined to consider CPA business for their permission-based list to generate revenue because they need all they can get. When it comes to their customer acquisition efforts, they often do not have the financial clout to demand or even shop for CPA deals -- to pay only for what they get.


For some e-mail list owners, CPM will prevail by the strength of their lists. Good quality business-to-business as well as tightly vertical and specialized lists in the consumer realm will always command a solid CPM price. It is not a whole lot different from the Mercedes dealer who, when asked about price, points to the sticker. Demand and quality reign as king and queen.


As for some Web sites that must have new registrants on an ongoing basis, CPA is truly an attractive alternative. Paying a CPM rate in the $250 range and having to mail large volumes to reach acquisition goals can get very expensive and can be ineffective. Burn rate accelerates. In the increasingly tough market to get people to go to your site, sign up -- and, for permission-based marketing, hopefully opt in -- CPA is looking more and more attractive. Good business, if you can get it.


CPA is a good deal because it makes sense. The cost of broadcasting large amounts of e-mail is becoming more and more affordable. I know that when I go to buy zucchini or tomatoes, I don't like to pay for what I'm not getting. The same type of thinking, when it comes to the aforementioned snail mail net-name deals, is what made and continues to make direct mail so effective. I believe CPA will begin to gain a larger foothold in e-mail marketing as the Net continues to grow up and becomes the standard someday. It just makes sense.
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