GOOG unveils Pay Per Action advertising
By Richard Koman - March 21, 2007
Don Dodge has a wrapup of Google's new Pay Per Action advertising plan. Under this model, advertisers only pay when users actually do something on the site, like filling out a form, providing email, etc. It's a natural step in targeting advertising.
PPA will be attractive to the highest cost CPC advertisers. My guess is that the very top of the CPC market will gravitate to PPA ads. Mortgage loan companies and automobile advertisers now pay the highest CPC rates, sometime $4 to $10 per click. These are very expensive clicks to get someone to read your ad. Why not filter out the curious ad clickers and just pay for the serious ones that actually fill out a form? These advertisers might be happy to pay $40 for a PPA that fills out a form. Multiply this by the millions of people every day looking for a loan or new car and you can see why this will be a very big business.Spammers and Click Fraudsters will attack. Wherever there is money fraudsters are soon to follow. They will figure out ingenious ways to trick people into taking actions so they can collect the PPA revenues. The Spammers "cat and mouse" game has also just been taken to another level. There will need to be systems in place to verify the data entered into a form to make sure it is a valid action. They will need to verify that email addresses are valid or IP addresses for downloads are legitimate. You wouldn't believe how sophisticated these on-line fraudsters can be.
Affiliate marketing networks like Commission Junction and LinkShare are screwed. These networks also operate on a cost-per-action basis, mostly with online retailers. Even though some of them have scale, they will not have the ability to compete with Google on sheer size of network. Advertisers flock to volume, which drives average pricing up. When prices increase, publishers flock to the new platform because they’ll earn more. Look for serious publisher leakage from the big affiliate networks over time as this new product scales up. If you want to argue this point, note what happened to the stock price of Commission Junction’s parent company, ValueClick, today. And that’s even though the market has largely adjusted for this news already - this move to add PPA ads has been rumored for some time.
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Comments (3)
Tom, Thanks for the link. I enjoy reading Silicon Valley Watcher every day.
You know the real hidden gem in that Google announcement was the "embedded contextual ad link".
It allows a content or site owner to embed a link into your blog post or editorial that is really a Google Ad. So instead of having the ads off on a right sidebar...they are embedded in the actual story content.
This is a HUGE change and could have dramatic impacts. I plan to write a separate post about that.
Don Dodge
Posted: March 21, 2007 11:03 AM
Don, that will bring about an interesting variant on the "pay for post" issue. GOOG constantly recommends to website owners that AdSense text links blend into the page and look like part of the page rather than ads. This would take this approach a lot further, along with greater rewards for the publisher.
Posted: March 21, 2007 1:59 PM
* Google and the affiliate networks can and will co-exist. The affiliate market is completely different than simply PPC or PPA models. Lifetime for subscriptions, Views, etc in addition to the creative possibilities... so it is by no means obvious that Google will be a serious challenger here - or that it even wants to.
* Google's PPA offering is great for smaller publishers who are already using AdSense right now anyway.
* Larger advertisers want much more control and support than Google is offering. That's where affiliate networks excel and are clearly superior.
* Making affiliate marketing successful is about more than technology - it takes hard work and a hands-on approach, and that's not Google's style.
* Speaking of technology though, affiliate networks have developed highly sophisticated tracking systems that cover the vast majority of possible scenarios to make sure that partners/affiliates get paid for every qualified lead, sale, or whatever the commission model might be. Does Google have this level of sophistication in its tracking?
* Another point here is the scalability of various channels called multi-channel marketing. The today's sophistication of networs enables some players to manage all possible online marketing partnerships. This alone differs significantly from Google's overal objectives. Here I see them indeed making a pitch for an affiliate network, not only to get the horizontal reach but also to benefit from their overal know how.
Posted: March 23, 2007 11:39 AM