August 30, 2001, 12:00 AM

Shining a light into online advertising

Commission Junction unveils a plan whereby retailers will know which portals and content sites deliver the most shoppers and portals will know which retailer’s customers produce the most commissions.

Commission Junction Inc.’s recently-launched Open Marketplace feature will likely help set apart the Santa Barbara, Calif.-based company from other ad networks of its type, but the rest of the story is what the offering says about the state of the online ad market. In two words: it’s tough.

Commission Junction, which matches advertisers (retailers and other marketers) with sites that sell ad space, launched Open Marketplace in July to make pay-for-performance advertising “truly measurable,” the company says. Open Marketplace publishes payment and conversion statistics on advertisers, publishers, and ads in the Commission Junction network. It calculates and displays (to network members) earnings per 100 clicks-what it has dubbed “EPC,” a measure designed to show an advertiser’s ability to convert visitors to revenues. It also publishes network earnings, rankings that show where an advertiser or publisher ranks relative to the network based on commissions paid or earned, respectively.

Those are performance measures not previously published. And they are important to both sides of the equation: Commission Junction matches sites with advertisers and those sites earn commission based on leads and sales the ads on the sites generate. Those sites want to make sure they are accepting advertising from retailers and marketers who have the ability to turn visitors into buyers. At the same time, marketers want to make sure they are placing ads on sites that attract visitors likely to buy their products.

“We’ve essentially turned on the lights for the online advertising industry,” says Commission Junction CEO and co-founder Lex Sisney. “Advertisers and publishers have been fumbling around in the dark, unsure about fair pricing and measurable results.”

Publishers have no trouble selling premium inventory, the 30% of online ad space that affords the best reach and best targeting opportunities. But in the current online ad marketplace, publishers have to hustle to sell the other 70%. Retailers and other advertisers seeking to rein in costs are showing increasing interest in pay-for-performance deals. And where advertisers want to go, publishers are following in droves, while trying to make themselves stand out from the crowd.

Repositioning

Commission Junction’s Open Marketplace is just such an attempt. “CJ, like a lot of the network affiliate companies, is repositioning itself as a pay-for-performance ad network,” says Rudy Grahn, an analyst with Jupiter Media Metrix, New York. This puts pressure on other pay-for-performance ad networks that don’t offer this tool. So the Open Marketplace may assist me in choosing CJ as a vendor over other affiliate networks. But this is nota primary planning tool.”

That’s good enough for Half.com, eBay’s fixed-price online marketplace for discounted clearance goods. It’s been working with Commission Junction since March 2000, but in the past six weeks, which overlapped with its posting on the Open Marketplace, it’s increased affiliate sign-ups by 20%. While Half.com still is calculating how much of the increase has been driven by the Open Marketplace listing versus other efforts to attract affiliates, there’s no doubt the company’s track record as published in the Open Marketplace makes it appealing to potential affiliates. With network earnings that rank in the top percentile and an average EPC of $9.13, it’s one of the top-performing sites listed.

Pay-for-performance network advertising has a place in every ad campaign, says Grahn, but is primarily a strategy for smaller retailers. “It helps us, but it’s going to help even more the tier-two retailers,” Todd Kevitch, affiliate manager at Half.com says. “If a publisher wants to put a link to five different book retailers on its home page, it may know half.com but may not know four others. It’ll see 23 other books sites on Commission Junction and pick out the ones with the higher EPC.”

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