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Old 12-18-2001, 08:39 AM   #1
Edwin
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Exclamation The fundamental problem with Commission Junction

(Warning: this is LONG - but if you use Commission Junction extensively you owe it to yourself to understand this!)

I like Commission Junction for a lot of reasons, notably its relatively simple interface (once you get used to it) and the range of merchants it offers, as well as the super one-cheque policy!

However, there is one really fundamental problem with CJ that I don't see people discussing much: the reliance on EPC numbers.

Now CJ defines EPC as "Earnings per 100 clicks" and presents those numbers over the last 3 months, and over 7 days, for people to select the advertisers and ad creatives that will perform best... or NOT!

Here's an example that illustrates the absurdity of this metric being used as the "fundamental unit" for comparing programs:-

Program A pays $100 per purchase of an oil-fired heater (this is a fictitious example by the way). About 0.5% of visitors clicking through the ad will become buyers so CJ measures an EPC of $50 (1 in every 200 click-throughs signs up, generating $100 commission, so the commission per 100 clicks is half that, i.e. $50) On the face of things, this looks VERY exciting! Wow, $50 per 100 clicks... (hold that thought for a moment!)

Program B pays $0.05 per free signup to a newsletter. About 20% of visitors clicking through the ad will sign up, so CJ measures an EPC of $1. (1 in 5 click-throughs sign up which means that 100 clicks will produce 20 signups and $1) Doesn't look so hot, right?

WRONG!

If you just worked through the logic (and this is the type of logic CJ *encourages* by the way it presents the global advertiser stats) you might have arrived at completely the wrong answer.

Why? Because EPC (earnings per 100 CLICKS) takes NO ACCOUNT WHATSOEVER of the "pulling power" of the ad itself i.e. how effective the ad is at getting people to click through!

Going back to our two examples, in Program A an average webmaster has to show 2,000 banners to get a click-through (hey, the purchase of an oil-fired heater isn't exactly top of many peoples' minds...)

Now remember, 100 clicks are worth $50 (we saw that earlier) so each click is worth $0.50. Now you can see that 1,000 banner displays are worth just $0.25 i.e. the program has a CPM equivalent of $0.25! Not looking so hot...

Let's look at program 2. A single click was worth $0.01 since it took 5 clicks to earn a measly $0.05. HOWEVER, people are being asked to sign up for a fun free newsletter, and the ad is pulling a 5% clickthrough rate. Suddenly, for every 1,000 banners being shown, there are 50 clicks... which means $0.50 CPM!

Frankly, these examples are just scratching the tip of the iceberg as in practice CJ spits up much more extreme cases.

Let me close by illustrating the above with some real stats from my site (of course, your mileage will vary but the PRINCIPLE remains the same!)

I ran the Half.com promotion and it pulled a $5.70 EPC (meaning for every 100 clicks I would generate $5.70). However, after showing 607,042 banners, I generated just *263* clicks (less than 0.05% clickthrough rate), netting me $15. This is a CPM equivalent of $0.02 (that's TWO CENTS CPM)

I ran a promotion for Streamload.com and it pulled a $0.09 EPC (meaning that for every 100 clicks I would generate just $0.09!!). However, after 5,542 impressions I generated 1,685 clicks (a 30.4% clickthrough rate) netting me $1.48 for a CPM equivalent of $0.27.

So the "headline numbers" ($5.70 EPC vs $0.09 EPC) - which is all CJ would give me to compare the two programs were it not for the fact that I ran both for a while to get more data - conceal the ALL-IMPORTANT DETAIL: Streamload outperforms Half.com on my site by close to 14x. That's 1400% better performance, to put it another way.

Until CJ decides to release EPM data for its campaigns, the stats it offers are frankly only useful for ONE very small thing: to see if the merchant is improving their program over time. If the 7-day EPC is higher than the 3-month EPC, then the merchant must have fine-tuned either the ads, the back-end sales process on their own site, or both.

Here's hoping you're now better equipped to make sense of CJ's soft-as-quicksand EPC reporting feature!

Edwin
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Old 12-18-2001, 09:15 AM   #2
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I understood this as well.

You are right Edwin.
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Old 12-18-2001, 10:06 AM   #3
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Hi,
and that seems to be the same with EPC rating.
I got a mail from a merchant, containing the following:

We regret to inform you that you have been dropped from the Playcentric - Music & Movies merchant program, and you will no longer be affiliated with this advertiser as of 12/10/01. This is not intended as disapproval of the quality or value of your Web site. Each CJ advertiser has the option to determine how many and what types of publishers they will approve to their affiliate program, and they may also make changes to their program which warrant removing some of their publishers.In this case, the advertiser has supplied the following reason for removal:

High number of hits and 0 sales; therefore hurting our C.J. EPC rating.



For me that only means, that I did my work very well, but the merchant's products and services are bad.

Jonny
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Old 12-18-2001, 10:30 AM   #4
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I agree in what you say!
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Old 12-18-2001, 12:07 PM   #5
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You're right to a certain degree. EPC surely doesn't tell the whole story. It is a little more valuable than you suggest however. For example I think there are 3 or 4 sites that sell magazines at CJ. Comparing the EPC for these is constructive. I'd expect a "People Magazine" creative from all of them to get about the same CTR so the EPC could help you decide which merchant is the better choice.

The problems with EPC are as you describe (doesn't take CTR into account) and as rolli describes (encourages merchants to drop people with low EPC). However there are also problems with doing an effective CPM. Namely that the effective CPM will vary extremely widly based on the site.

What I really don't understand is why CJ doesn't allow the publisher to categorize their site and then calculate effective CPM for each advertiser within that category. Yes, it will still vary within the category but it shouldn't be to the same degree as across all sites.

The last problem with effective CPM and I think it's more subtle is that if you're not actually paid on a CPM basis, the effective CPM can and will change over time based on your traffic. If your site gets a lot of return visitors the effective CPM for any given advertiser will likely drop off over time. If you have a small amount of highly targetted traffic, you might get a great effective CPM. But getting a huge amount of additional traffic that's not targetted will surely drive that effective CPM into the ground.
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Old 12-18-2001, 12:38 PM   #6
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The useful function of EPC is to compare ads within particular program. As Edwin pointed out between different programs it is not much of a use but within the same program the EPC might be safely be taken as a tool to compare the effective pulling power of that particular ad.
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Old 12-18-2001, 01:11 PM   #7
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The main value of EPC IMHO is it lets you see who has probably broken their tracking

If a merchant has EPC = $0.00 for 7 days and 3 months, don't expect to make too much money!

There is a merchant I know of that abruptly stopped tracking leads in mid January on the same day (I think) as they revised their web site.

Their EPC is still $0.00 for 7 days and 3 months, 11 months later.

Last edited by WildComputer; 12-18-2001 at 01:16 PM.
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Old 12-18-2001, 04:37 PM   #8
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LAH - I'm not sure I agree with you. You might actually see better overall performance with a banner that gets a lower EPC for a particular program. It goes back to the way that EPC is defined.

Let's say a program pays $1 per lead and has two banners.

Banner 1 says: don't bother clicking here unless you want to sign up for our program. You show 10,000 banners, it gets 10 clicks and 1 lead or $10 EPC.

Banner 2 says: come look at this awesome program that's free and win a playstation 2. You show 10,000 banners, it gets 1,000 clicks and 100 leads or $10 EPC.

You decide which is better.

Sure the numbers are made up and most likely exagerated but that's the problem with EPC. It alone doesn't distinguish between these two cases. In many ways the EPC measurement punishes banners that attract a lot of clicks. If the program has a broad interest and the site does a good job of selling it a better CTR and a lower EPC might make more.
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Old 12-19-2001, 05:28 AM   #9
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Arrow jnestor !

That was a good example.
A clear way for someone to understand.

I agree completely & with Edwin's thoughts too.
Most of us have already known about it but some incld. me have not actually calculated the difference. A large one it seems.
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Old 12-19-2001, 06:19 AM   #10
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It's been only lately that I start to appreciate the value of the EPC.
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Old 12-19-2001, 06:23 AM   #11
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Nicely put jnestor, but this is where the three month EPC and 7 day EPC comparision comes into focus.

In the above example the EPC for banner 1 will most likely be less than the EPC for banner 2 because banner 1 being of poor quality won't attract a consistent CTR and thus leads whereas banner 2 will perfrom strongly thus increasing it's 3 month EPC.
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Old 12-19-2001, 09:16 AM   #12
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Edwin,

A fantastic real-world observation and explination.
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It's all just ones and zeros.
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Old 12-19-2001, 11:30 AM   #13
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> In this case, the advertiser has supplied the following
> reason for removal:
>
> High number of hits and 0 sales; therefore hurting our
> C.J. EPC rating.

Man... that advertiser's actions seem kind of like "cheating".

Last edited by demae; 12-19-2001 at 11:31 AM.
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Old 12-19-2001, 12:09 PM   #14
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The merchant brought this mail throug cj.com mail department, and I think cj.com knows of that. If they do not investigate in that, have no chance to know wether I was cheated or not.
Jonny
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Old 12-19-2001, 03:12 PM   #15
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Quote:
Originally posted by LastActionHero
Nicely put jnestor, but this is where the three month EPC and 7 day EPC comparision comes into focus.

In the above example the EPC for banner 1 will most likely be less than the EPC for banner 2 because banner 1 being of poor quality won't attract a consistent CTR and thus leads whereas banner 2 will perfrom strongly thus increasing it's 3 month EPC.
Umm low ctr doesn't equal low EPC... Just because an ad get's a lower ctr it doesn't necessarily mean it will get a lower epc. In my experience it happens to be the total opposite. A banner that doesn't entice anyone but those who really want to join a program usually get low ctrs and a higher epc.

Doesn't this discussion sound familiar? I'm surprised CJ didn't include an EPM or CPM.

Last edited by Kaiosama; 12-19-2001 at 06:28 PM.
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