Andrew Chen Archives

Saw this on TechCrunch today: Controversial PayPerPost Raises $3 million. I haven’t used the service, but it’s interesting thing to how they are approaching creating a new marketplace.

Building a marketplace is hard. Not only do you have to get the chickens and the eggs to all line up the right way, you have to make sure everyone trusts each other, and also, that everyone agrees what they are buying and selling. This is defined as the "ad unit."

In PayPerPost’s case, they’ve decided that the most factors that define their ad unit are:

• Price
• Minimum words
• Dates
• Tone

(This is from the screenshot on the TechCrunch post)
In analyzing this approach, you have to ask yourself, first of all, is this going to be branding or direct response focused? You don’t really have to pick one or the other (for example, TV has branding and DR infomercials), but it’s a useful exercise to understand the primary benefits of the medium.

You could argue that it’s really part of some viral branding push. This would be a fairly hard play, for a number of reasons, but if they wanted to focus on that area, they’d need more "brand" stats. For example, they’d want the number of unique users that are reading the plug, what their audience composition and demographics are (perhaps partnering with Nielsen or comScore), etc. Furthermore, they’d need some unique measurements around the "buzz" factor of a blog, perhaps based on Technorati’s in-bound link metrics or something similar.
Those are the changes they’d probably want to make on the product side. On the business side, they’d need to only deal with very reputable blogs (and would need to prove this), and create enough relationships that ad agencies can buy lots of reach. If you can only reach 1,000 people, it’s hardly worth getting out of bed. Furthermore, under the brand model, they’ll need a little more money, just to start a New York office with agency people. (I’ve written about this before)

A much more likely scenario is for them to focus on direct response. The advertisers for DR are much scrappier, will pretty much try anything, and will probably be the early adopters for that service. Furthermore, these guys are much more likely to want to buy links from random, unbranded sites, particularly if these sites can help their Google Pagerank. (This might be the real benefit of the service, actually) In that case, PayPerPost will be encouraged by their advertisers to understand what the CTR per blog are, how much click volume they can probably drive, and then, as much as possible, they will want to know the conversion rates. Ultimately, this will make PayPerPost use a mechanism similar to Commission Junction’s or Linkshare’s, where links have clickwrappers with affiliate IDs attached to them to track all this random information. The DR advertisers will then compare the performance of these new blog ad units with search, display, affiliate, and whatever else they are buying.

Either way, it seems like PayPerPost is already on a good track – it’ll be interesting to see which side of the tracks they land, within the advertiser world. The process of defining the ad unit is probably the most important set of decisions for the company, since it’ll make or break their marketplace. Another company that has a set of interesting decisions like this is NextMedium, which is building a marketplace for product placement. (That company is a great study of ad units too – it’s clearly branding, but what do you measure? Time on screen? A-list celebs? Dimensions? etc.)

My guess is that for PayPerPost, in the success case, it’ll be direct response at first, but as they grow and add money, they’ll be able to pitch this stuff as a large, viral, "brand integration"-type ad buy to agencies. Best of luck to them!

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