Wednesday, October 15, 2008

CPA Offers: A Safe Harbor in an Advertising Recession?

Many, if not most, of the successful social games are using CPA offers tied to in-game virtual currency to monetize, in addition to advertising.

However, while advertising spending is expected to slow in a recession, particularly brand advertising, performance-based CPA offers are expected to do well.

Or STRENGTHEN. According to a good friend of mine who works for a company that provides the CPA offer inventory to companies such as SuperRewards and Offerpal, the last two months have been his company's BEST EVER.

That bodes well for social games companies. We have a core revenue stream that not only will survive a recession, but possibly improve. Awesome.

However, there is a flipside. Daniel James, CEO of Three Rings (maker of social gaming worlds, Puzzle Pirates and Whirled) mentioned in his presentation that his cost per acquisition using CPA offers had dropped over the last few months as he experimented with different advertising techniques. He could buy the same amount of CPA traffic for half the price, which he attributed to a softness in the ad market.

So a provider of CPA offers sees his best months ever and a buyer of CPA offers is seeing cheaper inventory. One possible explanation: increased volume of CPA inventory so that even as the price of CPA drops, the amount makes up for it.

Other explanation welcome in the comments.