Barry Schwartz reports that Google has just launched Pay-Per-Action ads.
According to Schwartz:
Google Pay Per Action will allow advertisers to create ads that cost only when a desired action is triggered. The advertiser sets the price per action; for example, an advertiser can decide to pay $5 per lead acquisition, as opposed to paying per click or per impression.
The New York Times ran an article on the subject entitled “Google Tests an Ad Idea: Pay Only for Results.”
Says Times reporter Miguel Helft:
Many advertisers find cost-per-action appealing, as it greatly reduces their risk, since they are not charged for ads that are ineffective. The model has long been used online by “affiliate marketing” companies like ValueClick, which have created networks of hundreds or thousands of Web sites that display small ads for e-commerce sites. The publishers are paid when they refer a user who makes a purchase.
But many other companies are using cost-per-action ads in different ways. They include the search-engine start-up Snap, which displays cost-per-action ads next to search results, and Turn, a network that matches advertisers and publishers interested in cost-per-action ads.
We think it is a model that all the large players in search will be embracing over time,” said Tom McGovern, the chief executive of Snap.
For the time being, Google is not putting cost-per-action ads next to search results, limiting them to publishers’ Web sites and essentially creating its own affiliate marketing network. Industry insiders said Google’s entry into the market was likely to accelerate its growth.
Insightful as always, Scott Karp asks on his Publishing 2.0 blog “Can Google Transform The Entire Web Into A Direct Marketing Machine?”
Google’s contextual advertising revolution has already transformed the structure of the web, leading to the creation of millions of web pages with no other real purpose than to serve AdSense ads. The content on these pages is purely a vehicle for advertising — the traditional Chinese Wall between editorial and advertising has been obliterated. And it has force many publishers who follow a more traditional editorial path to start poking holes in the wall. Content has always been a marketing vehicle, but never at such a granular, easy-to-manipulate level.
With its CPA program,” Karp continues, “Google will drive this phenomenon to the next level. With cost-per-click ads, spammers create bogus pages where confused consumers click on ads in an effort to escape. But with CPA ads, clicking is not enough. The game is now to manipulate consumers not only to click, but to take some further action. And I don’t use the word “manipulate” arbitrarily. This is about turning the web into one big pile of junk mail, aimed at getting you to sign up, buy, or commit to something that you hadn’t necessarily wanted.
Google must know that most CPA (Cost Per Acquisition) deals waste publishers’ time because they aren’t very often effective and haven’t actually been optimized. Traditionally, instead of offering an optimized offer, people mash-up an ad and a landing page, then try to convince publishers to risk the deal. Publishers pay with their time and inventory. Since Google’s CPA deal is automated, it won’t waste time but could waste inventory.
I’ve always found that it’s more effective for an advertiser to spend the time developing an optimized offer–often using cheap CPA or very cheap CPM inventory–to maximize conversions. Once you establish your baseline cost-per-action, go ahead and buy CPM inventory at about 10-20% the cost of baseline. However, the optimization cycle must come first! Google offering CPA advertising will most likely bring around a new batch of lame and lazy advertisers, the mediocre ones that currently are avoiding their own risk by not even paying for traffic on a CPM basis today.
Will Google enforce a minimum conversion expectation? And, if so, how? What will the minimum be?