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August 5, 2009

CPSA: The New Pricing Model For Social Media?

What’s the best way to price social media advertising or marketing programs?

That’s one of those questions that screams for the ever-honest “it depends” answer. Maybe that’s because we need a new pricing model. Let’s first take a look at some current options and review their strengths and weaknesses in this context:

  • Cost Per Impression (CPM): It’s great for branding, which is the overarching strength of social media. But the value marketers get from social marketing isn’t just exposure — it’s something deeper.
  • Cost Per Click (CPC): The model that made Google what it is won’t do the same for Facebook, at least not on the same kind of scale. CPC is tailor-made for direct-response marketers, while social media is centered on building relationships. This is the classic “square peg/round hole” issue.
  • Cost Per Action (CPA): We should be able to put this to rest easily, as marketers shouldn’t be driving a relationship-building vehicle on a conversion track.
  • Cost Per Engagement (CPE): This gets closer, as some engagement metrics translate well to various social marketing programs, such as time spent with a widget or percentage of a shareable video viewed.

When you want exposure, traffic, conversions, or interactions, each of these four pricing models comes in handy. But social marketing, when done right, achieves something much different: relationships. How does that fit in neatly with these pricing models?

To that end, I’ll throw out a fifth model: Cost Per Social Action (CPSA). It’s for any action with a distinctly social quality that leads to either new relationships (such as through “viral” referrals or acquiring new followers and fans) or deepening existing relationships (such as through “likes,” comments, responses, and ratings).

The main benefit of CPSA is that marketers know they’re paying for something social and relationship-oriented. More importantly, marketers know they’re not specifically paying for exposure, traffic, conversions, or interactions (though those can all provide additional value). It’s an acknowledgement that social media is something else, so it’s deserving of a new model, one that stresses relationships above all else.

There are downsides too, and I’ll spend even more time on these:

  • It’s a new model. The alphabet soup is too crazy already. There are others too, like CPL (Cost Per Lead) and CPS (Cost Per Sale). So now marketers have to learn another?
  • Look at the publisher or vendor side too – they now have to sell yet another pricing plan? Then again, some publishers like VideoEgg have used Cost Per Engagement pricing to differentiate themselves. Could some differentiate themselves by promoting CPSA?
  • There are too many letters. Come on, at least simplify it to three letters so it stands a chance. Though you could argue that to stand out, maybe the four-letter version will differentiate it.
  • It’s vague. A social action can mean so many different things. Just looking at Facebook alone, can you really say that the same pricing structure can be used to cover everything from the number of fans accumulated to the number of virtual gifts sent? Then again, CPM covers everything from an impression on a portal’s homepage to an impression that’s highly contextually relevant on a blog. Similarly, CPC is used for search and contextual marketing, two very different approaches.
  • There are already even more specific social metrics, such as CPI — a Cost Per Install model for widgets. CPSA doesn’t account for enough of the intricacies of social media that are already being addressed directly.

What’s a social action worth anyway? The further anyone veers from reach and sales, the harder it’s going to be to tie this into marketers’ traditional metrics.

I’ll leave it to you now: is CPSA needed? Are some already using a version of it? Is this latest version of alphabet soup past its expiration date? Share your thoughts in the comments to address CPSA the way it should be: socially.

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