Jonathan has helped optimize...

« Buy Branded Keywords? A Case Study on Traffic, Conversion and RPV | Main | 5 Lessons From Multivariate Tests on Buttons »

Google Pay Per Action Reaction

Action_jacksonWith Google’s announcement that pay-per-action (PPA) ads are launching beta (on AdSense) the world of optimization and analytics may be forever changed, or not. As it works, you get to name your price and it will be Google that is measuring conversion and optimizing the serving of ads based on PPA.

This becomes a real game changer if this model ever hits the SERPs. That would effectively squash affiliate marketing as we know it and roll it up into SEM. I don’t think this will happen for three reasons.

1. Advertisers are already getting incredible ROI from PPC on the SERPs.
2. The click fraud problem in the SERPs is overrated.
3. Google has a great formula for revenue and profitability with PPC and Quality Score in place.

At the outset, while an incredibly interesting and somewhat predictable development, it is not going to have much of a factor in the worlds of SEM and Affiliate Marketing. This is simply because with a few exceptions conversion (or action) rates on contextual ads are very low. The net impact may be that more of these ads are run because marketers that had turned off these campaigns due to high CPA and will now activate them again with this model available. This will give Google a lot more contextual ad inventory though I’m not sure how they will leverage this.

No question that part of Google’s PPA/CPA strategy is to drive Google Analytics adoption. For reporting reasons it is required that you have GA to participate. I have been hearing some mixed commentary for months on how well Google is doing with both GA adoption and support to their install base, including the Website Optimizer. They have certainly made this a priority internally as there have been a slew of new hires and some big names brought on board as well.

Part of their GA strategy may be to have SEM agencies to start using GA instead of their own bid management tools. I’m aware of at least one agency that recently bid on an RFP that included GA and Website Optimizer as part of their package even though they have their own bid management software and they are not an authorized support partner of either Google service. This strikes me as not a good direction for any client to take. There are some interesting dynamics for businesses to start sharing their critical customer acquisition costs with Google.

I do applaud Google’s desire to continue focusing on relevance and optimization. Mass adoption of PPA would dramatically lower their short-term AdSense revenue, a key component of their earnings and profitability. Possibly the successful adoption of Quality Score from a revenue generation perspective has made this idea practical. Of course there is also a huge anti-click fraud component to this strategy.

The strangest part of this entire announcement is the introduction of a new ad format for Google, text links. It’s fascinating to me that Google would roll this out without any known testing since beta for Google means a formal release for anyone else. Text links in themselves have always been a high performer for purposes of click through so these may actually work pretty well. According to Google the infamous “Ads by Google” will appear on a mouseover of the link to let users know it is an ad but this still seems to run counter to so much of what Google espouses about ads and user experience. First off it is interruptive without being helpful. Second, you do not know who bought the link or where the link takes you. Likely these links will be used to fool visitors into going to a site much the way AdSense currently preys upon unsuspecting web neophytes. If anything is a shot at the heart to the affiliate networks this is it.

Nothing like having your future held in limbo by Google, but then again, don’t we all?

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d8341ccaa353ef00d83454c0ac69e2

Listed below are links to weblogs that reference Google Pay Per Action Reaction:

Comments

Jonathan, thanks for your thoughtful analysis. I'm in the mortgage space and have avoided any CPA or PPA as to me CPA fraud is a more serious issue than click fraud. In the mortgage space a website owner can fill out a form and get paid $50 for it, much more rewarding and easier to game than click fraud.

Second question: Any news of whether this product will be offered in the search network or only via the publisher network? Is the beta only in the publisher (adsense) network?

Paul

Hi Paul,

Your space and lead-gen in general presents an interesting problem that is not explored enough. I know there are various methods of lead validation but I also know that sometimes affiliates can get a payout before these leads are verified. Similiar to the way publishers can get screwed on returns on sales via their affiliate network (something I know quite well from my first online business).

As noted in the post I don't think this will hit the search network as it would be an incredibly difficult dichotomy for Google to optimize listing based on bid, CTR and CPA/PPA. So for now it rests in adsense.

Cheers,

Jonathan

As a self described "white hat SEO professional I have never used PPC programs. It's kinda like it's a religion taboo, if you will... However, I think PPA is the wave of the future. I have been waiting for this natural progression to occur.

I have always considered paying for a visitor to be a waste of time. I've clicked on lots of sites never intending to buy anything. So paying for visitors made no sense to me. However, paying when someone actually pay is just another cost of doing business and I CAN LIVE WITH THAT.

Since I have never used AdWords I will have a long wait before Google's PPA becomes available to me... Oh, darn....

Well PPC is getting good source for marketers to earn quick money with ads stuff , on the other hand its getting a bit confusing too what to do and what not to do .

Hi jonathan! Thank you for this entry i learned something new in your post.Pay per click is very broad in nature and need a lot of research and continued studies.

-faith-

hello friend excellent blog about Google Pay Per Action Reaction thanks for sharing!!! I really enjoyed reading because I'm very interesting in all information about Google

The comments to this entry are closed.