With the launch of their new product, pay per action, is google encroaching on the affiliate marketplace?
It was an obvious step to make in the evolution of search, it started as a cost per impression based marketing (and in some markets still is), then move to a cost per click metric and now cost per conversion, taking the product further and further down the buying cycle. This obviously removes the majority of the risk for the advertiser and a lot of businesses will welcome the move. I mean, why not? its what the industry would call a “no brainer” if you are only paying for the sales you receive and you know your acquisition costs it is business without the risk.
Google’s motives are a little less clear. Obviously they will steal some market from affiliate channels by launching this, they will also potentially attract more advertisers who dont want the limited risk of PPC. Due to one of the caveats involved (you must use google analytics to track) it will also increase the user base for its analytics tool so a double benefit to them.
On the limitations side you must be paying for an action of which you recieve >500 of in the last 30 days. This limits smaller businesses and also means it may not be applicable to larger transactions or those further down the buying cycle. A car insurance campaign for example might not be receiveing 300 sales in 30 days but it will most likely be getting 300 quotes. They therefore may be willing to pay a set fee for each quote based on an average conversion to sale and their acquisition targets.
It will be interesting to see if this product takes off and how effective it is. Is it the next big thing or just another one of those products google wants to be the first to launch but will never take off?
It has been coming for a while now, google are going to begin trialling coast per action advertising across its content network with publishers only receiving revenue when a specified action is completed. This makes the content network more appealing to advertisers and as the article suggests removes the temptation for click fraud. I believe more work is needed in order to make this a reality but as suggested in the article this spells trouble for other ad schemes working on a cost per action basis.
Google Tests Pay-per-Action and In-Text Ads
Google is testing, on a limited basis, a pay-per-action ad form that ties publisher payment to a specific action by those who click the ad, reports ClickZ. Advertisers define the action – an actual sale, signing up for more information or something else – and the publisher on whose site the ad appears would be paid only when that action is completed. Though that means publishers don’t get paid as frequently as in pay-per-click ads, the PPA model usually results in higher single payments.
Publishers will have more flexibility in choosing the ads that run and in encouraging visitors to take action on the ad. That sort of encouragement has been forbidden by Google as part of the AdSense terms of service (TOS) for other ads.
Michael Arrington at TechCrunch points out that a move to PPA model lowers advertisers’ potential exposure to click fraud, since they would only pay when a specific action is taken and not when an ad is clicked (a click is easily automated). He also predicts that this will have a severe and negative impact on ad networks already operating on a PPA model simply because they can’t compete with Google in terms of scale of reach.
Arrington also catches a smaller announcement in the Google AdWords blog post announcing the PPA test. Google will begin testing in-text ads, similar to those already offered by Intellitext and others. When visitors to a site running these sorts of ads mouse over the linked text, a box appears with the ad displayed along with “Ads by Google” text.
This would be the first ad offering by Google to break out of the separate ad box and into the text of the site’s content.
