The big news around the SEM water cooler today is Google’s beta launch of PPA or pay-per-action ads. Although PPA ads are not new, (however, currently there is no network that compares in volume to Google) the ads differ form traditional AdSense ads, in that a user must click the ad and perform a specific action in order for the publisher (and Google) to get paid. The rub is, the advertiser must then inform Google if that user has performed an action, which could lead to fraud. Sound like Affiliate Marketing to you? I bet it does to the folks at CJ and Linkshare. Here’s what the FAQ at Google has to say.
Pay-per-action advertising is a new pricing model that allows advertisers to pay only when specific actions that they define are completed by a user on their site. Rather than paying for clicks or impressions, advertisers can choose to pay when a user makes a purchase, signs up for a newsletter, or completes any other clearly defined action that they choose. Pay-per-action ads are eligible to appear on publisher sites in the Google content network, and publishers can choose specific pay-per-action ads that are relevant to their site to run in new ad units that they create.
Yep, sounds like affiliate marketing to me. So what does that mean to advertisers? To publishers?
Tech Crunch has this:
This won’t affect big advertisers much, because they already track ROI on CPC advertising very closely. For smaller advertisers though, click fraud can wreak havoc. The ability to largely filter out click fraud will help them track ROI much more closely that they previously could. This will be a big help for them.
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.
The system does seem to have some advantages, like lower click-fraud, a cheaper, more targeted “affiliate†network and much more variety than is currently available. Andrew Goodman at Traffick spells out some of the advantages:
There are some clear positives in this experiment. In potentially opening up a CPA marketplace to all of its several hundred thousand advertisers, with tens of thousands of publishers on board as well, it instantly gains the clout of a service like Commission Junction or Amazon Associates, but with less friction and lower cost (and over time, greater variety to choose from, for both sides in the transaction). It gives publishers a new way of experimenting with maximizing their monetization efforts (with better targeting, not user overload as shown in the last post), and allows advertisers to explore a new way of buying content-targeted exposure through Google.
I asked our Director of Paid Search, Tim Breen to weigh in on this topic as well.
From Tim:
The new Google pay per action program (PPA), offers many potential benefits to advertisers but only time will tell if these benefits come to fruition. The two most promising benefits include:Reduced Fraud
As the popularity and success of paid search has grown, so has spending levels and so has the concern over click fraud. The PPA program should help reduce fraud by adding a level of complexity necessary to defraud the system. Fraudsters will have to work a little harder to register false names for newsletters and other actions that do not require identity verification. This should help reduce the frequency of fraudulent activity. However, it may not reduce the cost of fraudulent activity. If fact it could increase the cost of fraud since PPA bids will be much higher than bids on clicks. One fraudulent PPA session could cost an advertiser ten to twenty times more than a fraudulent click (maybe more). Certainly the most sophisticated fraudsters will automate their techniques for conducting fraudulent actions so the stakes could increase dramatically. Google needs to anticipate such actions and provide sophisticated fraud detection programs.Only Pay for Quality Visitors
Traditionally one of the most difficult challenges for paid per click campaign managers is to make sure paid per click ads attract highly targeted and qualified visitors. In many cases advertisers pay out a significant percent of their budget for visitors who view one page of the website and leave because the landing page didn’t contain the information they wanted. With the PPA program, this problem is virtually eliminated. Advertisers can benefit by utilizing their full budget on quality leads.The PPA program is in beta launch and it’s only available on the AdSense advertiser network at this time.
Will this experimental beta product pay off for Google? Will it also take market share from (or even crush) existing affiliate marketers like Amazon and CJ? Only time will tell.
