A high quality publisher can just not meet up well with a particular network’s CPA offers, resulting in a poor eCPM. The only self-corerction is they leave at that point.

I agree with your example of not rewarding bad publishers, which is why dynamic eCPM bids very low or not at all for inventory that is not providing value.

The fact is that there are several ways publishers can obtain visitors to their sites and some produce less than desirable results for the advertiser. Take Hula Direct as an example. They were buying traffic to their [ridiculous] sites by having networks and adware company serve their URL as a full landing page then monetizing by putting up to 10 different ads on their site. Sites with good, quality traffic who obtain it through mastering skills like SEO and link swapping with similiar sites should be rewarded. Webmasters who take shortcuts should not be rewarded.

Thanks for engaging in a discussion.

First, your example is somewhat correct on a blind eCPM buy, but that isn’t how dynamic pricing works in our situation.

Site 2 wouldn’t get that disproportionate amount of volume if it weren’t generating conversions, and the eCPM they’d be getting would drop signficantly or they’d be entirelycut off to eliminate that waste. As you said, SOME testing is required, so in this case that’d have to be acceptable to determine if the campaign worked for that publisher.

Sites 1 and 3 would see a raise in eCPM and more of the advertiser’s budget heading in their direction since they generated conversions at a solid rate.

I agree with your basic premise that pay for performance (CPA) eliminates advertiser waste, but it CREATES publisher waste. You have publishers running lots of impressions that aren’t monetized at all, unless they end up with a solid conversion rate.

So what happens in your example above if it were CPA only, is that Site #2 quits your marketplace after a couple of days and never comes back before you’re even given a chance.

There are 100% CPA networks out there doing fine, but there’s a large group of publishers who have tried and failed or will never work with those networks because of the waste they get when they aren’t paid for impressions.

Reality is that publishers don’t always want to take all the risk, and it’s hard to minimize waste on both sides of the equation. We feel that our system does so with dynamic eCPM that tests and adjust quickly and automatically, combining the strengths of CPA and CPM ad buys.

Q: How does an advertiser find out what sites will convert without testing all the sites in the network?

A: I never said I was against a testing a network. Test periods are imperative for optimization but they should be limited, often times you can tell what is going to work very early on. Furthermore, (if you have the means to afford it) you can give yourself a better chance through using comScore data and other demographic targeting approaches. The idea is that you spend money efficiently by testing systematically and then once you find your sweet spot, running only those sites. If its a blind network, you do not know what sites are working. In an open network, you see exactly which sites are working AFTER the test period.

The definition of efficient:

1. Acting or producing effectively with a minimum of waste, expense, or unnecessary effort.
2. Exhibiting a high ratio of output to input.

Here is how a blind CPM buy can equate to waste:

Say (for simplicity purposes) a network has 3 sites on it. The advertiser is paying 1.00 CPM and has a desired CPA target of 15.00.

Site 1 generates 10 conversions on 100,000 impressions
Site 2 generates 0 conversions on 200,000 impressions
Site 3 generates 15 conversions on 100,000 impressions.

The advertiser has spent $400.00, their eCPA is about $16.00 which would be tolerable to the advertiser but if they saw which sites were performing they could have spent either $375.00 on a CPA buy (or could have eliminated all of site 2 traffic early on and spent closer to $200.00.) The advertiser is satisfied with the results they got and the network is happy because they know they eeked out an extra $200.00 here, but what if the advertiser knew they could have gotten the same results or better by spending half the money. Do you think they would be as satisfied? Note that the advertiser could have seen even better results because site 3 could have been making $1.50 instead and could have possibly given the ad better placement within its rotation and in turn generated even more conversions. You may argue, isnt this the same as using a dynamic CPM? The answer is no b/c the advertiser would still lose out on Site 2 albeit at a reduced rate.

An open marketplace where the advertiser pays only for performance is more efficient because 1. an advertiser is only paying when their ads produce the desired effect and they are minimizing the waste by not paying a CPM rate, 2. the publisher, if their traffic matches well with the advertiser’s offer, will make more money in terms of an eCPM and give better placement to that advertiser.