December 6th, 2010

Performance Based Internet Marketing � Beware of Shady Contracts

The new big word thrown out in the internet marketing world is performance-based marketing. This is when a client pays only for the performance of the company. Many interactive firms are moving to this model because it is an easier sell to the client. While in some instances performance-based contracts can be win-win, often they are not. It is not always better to hire a performance-based marketing company for your service or product. It all depends on how the contract is setup. Here are a couple of things to look out for:

1. Are they obligated to do the same work they would if you were paying them? Most of the time, the answer is NO. Most performance based contracts side to the vendor and simply state IF they get you XX performance, then you owe them money. If they don�t, you don�t owe them money. This sounds fine and dandy, but its not. Your company needs services performed on a daily basis, regardless of profitability to your agency. I will draw an analogy from the network marketing world. Just because someone signs up for to sell products on a contract basis, doesn�t mean they are going to. They will make a few calls, mostly the easy ones to people they know, and if they sell something, great. If they don�t sell to this small group, 99% of the time they wont sell anything. PERFORMANCE BASED MARKETING COMPANIES ARE TYPICALLY THE SAME. If your campaign is complicated and requires more effort than normal, chances are you wont get that extra effort and therefore, nothing ends up happening on your campaign. So great, you have a CPA deal with a vendor, but nothing happens and your business goes no where. The opportunity loss in this case is enormous.

2. Performance-based SEO campaigns – this is where I often see bad deals happen. Nothing is more crucial to an online company�s success than SEO. You need to make sure certain things are happening each month in order to gain rankings. Most performance-based SEO campaigns that I see are pathetic to say the least. These companies will bring on as many clients as they can, do the least amount of work possible, and bank on 10% of them achieving results and paying them. The 90% of the remaining companies simply never get ranking and the losses that result far outweigh what it would have cost to hire a legitimate firm to perform a legitimate campaign.

3. Performance-based PPC campaigns – All to often we run into companies that currently have a ppc campaign being ran on a 100% Cost per acquisition basis. While this sounds great on the surface, all too often they are paying their vendor way more than needed. This is especially true with larger clients that have a large offline push. The PPC vendor will normally buy up the low-hanging fruit terms like branded terms and long tail terms that result from their offline advertising. When they are spending their own money they are unlikely to push the envelope to find your true paid search potential. If you are going to go with a performance-based PPC campaign, do the branded search in-house, because that is very easy in most cases. Let the performance-based company go after generic terms and make sure they have to spend a minimum dollar amount per month to make sure you are getting performance out of them.

There are a lot of good companies offering legitimate performance-based deals out there. Simply make sure they are held accountable to a specific set of deliverables, outside of simply pay-per-sale as you will never reach your true online potential if this is the case.

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