A study by the IAB/PWC indicates 57% of display advertising was purchased on a performance basis last year. Figures for the first half of this year indicate online display ad spending continues shifting to pay for performance with greater velocity.

What are the implications for publishers, agencies and clients?

Publishers will have to invest into sophisticated yield management solutions to make up the shortfall in margin provided by CPM. Publishers will also have to realize that the distribution of content is now equally important to the creation of content – this new content reality makes behavioral targeting (targeting people as opposed to pages) the Holy Grail for for publishers and ad networks. This view is supported by research from eConsultancy that indicates 31% of advertisers display advertising budget is spent on online ad networks.

Agencies will have to balance the benefits of performance based media with a better understanding of their target audience behavior. Agencies will have to continue investing in analytics, insight and tools that provide a view on the impact each single buy has across the engagement, assist and completion of a conversion. Relying on performance based media, while effective in the short term is not sustainable in the long term. Cost per performance media should have a place in every media plan as a foundation program, helping support and fund tactical programs.

Clients will have to demand improved thinking and technology innovation from their agencies. On the other hand and while challenging, clients will have to realize a successful and sustainable Digital Marketing program requires a vision as much as short term targets. The temptation is to reduce investment in non performance based models to reduce risk – this is unfortunately done at the expense of the brand by placing more importance on the buying model than the actual communication and message.

In my view it is not necessarily about the buying model; CPC, CPA or CPM – it is about how the inventory and communication is continually optimized and managed to deliver both revenue and brand growth. Content, clicks and ad impressions are only of value when they continually optimized, monitored and tied to strong communications.

Alain Portmann, author of  ”When online display ad spending is performance based” is Web Liquid’s Founding Partner, Head of Strategy. Visit www.webliquidgroup.com for more thought pieces.