@andrewchen

Get the newsletter · 2018 essays (PDF) · Featured · Recent

What’s the ad unit? (PayPerPost)

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!

PS. Get new updates/analysis on tech and startups

I write a high-quality, weekly newsletter covering what's happening in Silicon Valley, focused on startups, marketing, and mobile.

Views expressed in “content” (including posts, podcasts, videos) linked on this website or posted in social media and other platforms (collectively, “content distribution outlets”) are my own and are not the views of AH Capital Management, L.L.C. (“a16z”) or its respective affiliates. AH Capital Management is an investment adviser registered with the Securities and Exchange Commission. Registration as an investment adviser does not imply any special skill or training. The posts are not directed to any investors or potential investors, and do not constitute an offer to sell -- or a solicitation of an offer to buy -- any securities, and may not be used or relied upon in evaluating the merits of any investment.

The content should not be construed as or relied upon in any manner as investment, legal, tax, or other advice. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment. Any projections, estimates, forecasts, targets, prospects and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Any charts provided here are for informational purposes only, and should not be relied upon when making any investment decision. Certain information contained in here has been obtained from third-party sources. While taken from sources believed to be reliable, I have not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. The content speaks only as of the date indicated.

Under no circumstances should any posts or other information provided on this website -- or on associated content distribution outlets -- be construed as an offer soliciting the purchase or sale of any security or interest in any pooled investment vehicle sponsored, discussed, or mentioned by a16z personnel. Nor should it be construed as an offer to provide investment advisory services; an offer to invest in an a16z-managed pooled investment vehicle will be made separately and only by means of the confidential offering documents of the specific pooled investment vehicles -- which should be read in their entirety, and only to those who, among other requirements, meet certain qualifications under federal securities laws. Such investors, defined as accredited investors and qualified purchasers, are generally deemed capable of evaluating the merits and risks of prospective investments and financial matters. There can be no assurances that a16z’s investment objectives will be achieved or investment strategies will be successful. Any investment in a vehicle managed by a16z involves a high degree of risk including the risk that the entire amount invested is lost. Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by a16z and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results. A list of investments made by funds managed by a16z is available at https://a16z.com/investments/. Excluded from this list are investments for which the issuer has not provided permission for a16z to disclose publicly as well as unannounced investments in publicly traded digital assets. Past results of Andreessen Horowitz’s investments, pooled investment vehicles, or investment strategies are not necessarily indicative of future results. Please see https://a16z.com/disclosures for additional important information.