Jitendra Gupta has a thoughtful perspective over at Read/Write web on "How to Build a Profitable Startup By Knowing Your Users Better" (based on a NY Times article). He challenges the age old notion of the CPM (Cost Per Thousand) advertising model and suggests that simply logging the number of unique visitors to a site is not enough. You need to know who they are and present more relevant ads.

I couldn't agree more. In fact, I would raise the stakes even higher and encourage ad-based startups to differentiate themselves from the pack by only charging for qualified Leads and closed-won Opportunities, aka Cost-Per-Action (CPA) or Performance-Based Compensation (PBC) models.

Update: Check-out Googles Pay-Per-Action Beta as an example of CPA.

Many marketers would shy away from PBC, but when I see the number of qualified leads our customers process through their i-Dialogue sites, I often wonder if I'm in the wrong business.

A PBC ad startup would essentially build their site on top of a CRM system and provide their advertisers with real-time Lead and Opportunity management features and reports. Rather than paying $20 CPM, an advertiser would pay $5 per qualified Lead and $10 per Closed-Won Opportunity (or whatever monetary value you want to associate with these measurements).

The definition of "qualified lead" certainly varies across industries, but the most basic definition typically involves:

+ Legitimate Email Address or Phone Number
+ Has a need for product or service within the next 12 months

The web is a 2 way communication channel and should not be subject to the old 1-way broadcast models of television and radio. Yes, more risk is assumed by site operators who adopt a PBC model, but the upside is greater too. Make sites easier to use and display relevant calls-to-action and the result will be more self-identified web visitors and won opportunities.