Value-Based Pricing (VBP)
In the interest of promoting a healthier marketplace between our partners and merchants, we are moving to a value-based pricing model (VBP) in October 2007.
Our goal with this program is to better align the incentives of our publishers and merchants. This program arises from the recognition that the quality of traffic (as measured by conversion to sale) from different publishers can vary significantly. Publishers sending lower quality traffic create downward pressure on CPCs, to the detriment of all. By aligning incentives for our publishers to send quality traffic, we all win together.
As a solution, we will dynamically adjust the charges per click to merchants by publisher source according to that publisher's overall traffic performance. Subsequently, the revenue per click to publishers will also be adjusted based on the merchant CPC. We evaluate the quality of traffic from our distribution partners by measuring the conversion to sale and adjust the merchants' cost per click accordingly.
With this change, Shopping.com partners can expect:
All existing agreements to remain the same To continue to receive a share of the merchant revenue To be evaluated based on a new metric: Quality Score. This metric will determine the value a partner receives on each click and will be available in the Partner Account Center upon launch of VBP.
Value-Based Pricing will encourage merchants to increase their investment with Shopping.com, driving a mutually beneficial relationship between partners and merchants and reinforcing our ecosystem.
Frequently Asked Questions
What is Value-Based Pricing?
We recognize that not all clicks convert equally and as a solution we are now switching to a value-based marketplace pricing model – Value-Based pricing (VBP). We will proactively adjust the charges per click to merchants by publisher source according to that publisher’s overall traffic performance. The amount we charge a merchant for each click will be based on the publisher’s overall traffic quality. We evaluate the quality of traffic from our distribution partners by measuring the conversion rate and the merchants’ click charges may be discounted based on the value of that traffic.
Why are you launching Value-based pricing?
Before VBP, merchants would pay the same price for each click regardless of whether that click resulted in a conversion to sale for the merchant. With VBP we will be adjusting the price on a per click basis based on the value of the traffic source as we measure it in real-time.
When will VBP begin?
The VBP changes will be introduced in the beginning of October of 2007. Though all merchants ultimately benefit from VBP, for a merchant to get the full benefits of the program they must have the Shopping.com ROI tracker integrated so that Shopping.com will have the right level of visibility into the performance and subsequent value of each click.
How does this affect the publishers?
Some publishers will see their value per click being reduced if their traffic quality is lower than our expectation. The charge for each click that a publisher receives credit for will be variable based on the overall quality of the click, as measured by the conversion to sale.
Does VBP change the agreements that are in place with the publishers?
No, the publishers are still receiving a share of the merchant revenue; the merchant revenue is now calculated from a variable price point.
How do you determine the value of a partner/publisher? How is the value discount factor calculated?
The value of partner websites is reported as the Quality Score. The quality score is a metric that is determined after we conduct click level analysis using the data that we collect, along with the data that is provided with our ROI tracker. Partners will be able to see the Quality Score on the Partner Account Center upon launch of VBP.
Will the Quality Score be visible in PAC reports?
Yes, we will be reporting your Quality Score in your PAC reports. It will be available at the Summary, Placement, and Category levels.
