Sunday, May 29, 2011

Dropping a Penny

Imagine a world in which for each step you place in a lawn, two completely unrelated parties to you pays the other a cent per step. I think it will almost give us a feeling as if we are dropping a penny each time we walk and someone else picks and distributes it. In worldly sense this sounds ridiculous and unless you are a celebrity you wouldn't expect to be paid for making a mere appearance.

Strangely although this sounds odd in real world, its common practice in the virtual world. Bulk of the online commerce is based on a similar concept. Every time you visit cricinfo, facebook and other popular sites there are two unrelated parties keeping count of the number of impressions that you create and transact between them, same happens when you visit almost all news web sites, social networking sites, search engines, free email services and even when you visit my blog :) This can be argued to be interpreted as "when ever you browse the net you are making someone else richer with each click you make!".  The main difference  here from traditional marketing is that if a billboard is put up each time you walk in front of the bill board no one counts it and pays because you walked in front of it, its a fixed sum transaction. (One can argue that bill board price was also done based on number of estimated number of users to see it)

The concept is called as online advertising and there are different models used in it. The one that I explained above is called as CPM (cost per mile) or CPI (cost per impression) or CPT(cost per thousand), where the number of impressions  are counted and there is a unit price paid by the advertiser to the advertisement agent - For example $20 for 1000 impressions. There is of course an alternate approach to online advertising which is called as CPA (cost per action) on of the popular once under this is CPC (cost per click), which doesn't mind about the number of impressions but counts the number of clicks or an accepted type of action like registration on the advertisers site or making a purchase on the site.

I hope this doesn't influence you when you click around sites in future :D

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