(Searchline) In the beginning, there was cost per impression: You, the online marketer, paid for the audience of a Web page. And it was good for the publishers, but only okay for the advertisers, because you couldn’t be sure those people were actively interested in your ad.
Then came cost per click, and it was better, because you could tell when your ad had motivated viewers to take one specific action, a click. That put you that much closer to the true prospective customer. Problem was, many of those clicks didn’t convert, and you weren’t in the business of buying clicks.
Then too, a new problem cropped up: Distinguishing real interest in a product or service from simulated interest by perpetrators looking to turn a buck through fraudulent clicks on their site’s ads.
Now cost per action is on the horizon, offering you the prospect of not having to pay until and unless a visitor completes whatever conversion you decide you want from advertising: a purchase, a content or software download, a site registration—whatever makes the most sense for your business and your online campaign.
Have we reached Nirvana?
Maybe not quite, but several ad networks have decided that the time is right to offer advertisers the chance to include pay-per-action marketing in their online mixes. Snap.com began offering the model in early 2005, and Turn.com, launched last year with cost per action (CPA) as part of its value proposition.
Now the action-oriented model is getting strong new validation from Google’s announcement a few weeks ago that it is expanding the CPA beta test it has been running since mid-2006. Rightly or wrongly, Google is the pacesetter in performance-based online marketing (“BusinessWeek” scare covers aside), and what rolls out of the Mountain View, CA, Googleplex may well crop up among the offering of the other engines too.
Here’s how Rob Kniaz, Google’s Pay-Per-Action product manager, explained the format in a March 20 post on the company’s Inside AdWords blog: “You’ll define an action, set up conversion tracking, and create ads that publishers in the Google content network can then choose to place in new ad units on their site… Publishers choose specific pay-per-action ads that are relevant to their site and can place them in a new ad unit on their page… You determine a fixed amount that youíd like to pay for a completed action based on the value of that action to your business. You’ll only pay when that action is completed, not for a click or an impression. For example, you may wish to pay $1 every time a user fills out a lead form on your site and $5 when a purchase is made.”
The salient points here are that the CPA ads will only be tested on Googleís AdSense network of Web publisher sites, where the company has been running mostly contextual ads. Those AdSense publishers can choose whether or not to accept Google CPA ads, and may choose to deliver pay-per-click ads instead if they think those will be a more profitable use of their ad inventory.
As to format, the beta test will allow marketers to deliver text-based ads, images or a new “text link” product. The latter is an in-line ad unit that looks like a regular hyperlink in text content. When a user mouses over it, a pop-up balloon headed “Ads by Google” appears; click on that, and you’re taken to a landing page paid for by the advertiser.
In setting up a Google CPA account, advertisers can list as many actions as theyíre willing to pay for, either choosing from a list of predefined conversions from Google or writing their own. They have to provide a description of those actions for display to Web publishers, including the amount theyíre willing to pay. And since visitors may sometimes take an action long after viewing a CPA ad, advertisers will be responsible for conversions that happen up to 30 days after a CPA ad was clicked.
The CPA ads will also depend on Googleís AdWords conversion tracking analytics; after all, Google and the publishers will need to be able to tell that an action has taken place. Advertisers will get a conversion tracking account (if they don’t already have one) and then add a small amount of code to their Web sites once theyíve defined the actions they want to buy and what they’re willing to pay for each one.
Right now the beta test is available only to U.S. advertisers, and participants must have an AdWords account. Volunteers can sign up at http://services.google.com/ads_inquiry/payperaction and will be admitted to the test on “a rolling basis over the next few months,” according to Google’s CPA ad FAQ.
So why is Google expanding this beta test now?
“Google is trying to remove potential barriers to advertisers trying to use its contextual network,” says Rob Murray, president of search marketing firm iProspect. “A contextual network is only as good as the relevance of the sites in it and the quality of the audience. [Google's CPA test] gives advertisers a risk-free entry to try its contextual network.”
Compared with the numbers advertising on the big engines’ search networks, both Google and Yahoo! have seen their contextual networks exert much less pull. That’s partly because many advertisers consider their ads better targeted—and their budgets better spent—chasing in-market consumers on the search results pages than simply latching on to keywords on Web content pages.
It also hasnít helped that Google and Yahoo! have been pretty unwilling to reveal the full roster of sites in their content networks or to let advertisers specify which sites and pages their ads will appear on. (Google said in a press report earlier this month that it would begin letting advertisers target specific contextual sites in the future.) The obscurity has tended to foster a belief that their content networks contain a few marquee Websites surrounded by a very high proportion of low-traffic, low-quality sites, including many parked domains and arbitraged “Made for AdSense” sites.
While advertisers are still waiting to get greater visibility into Googleís contextual advertising milieu, Murray says, the company has opted to give them more control over the advertising outcome by letting them set the conversions they want and pay only for those. “It’s part of a natural progression of online advertising, from search to contextual and from clicks to action, all giving advertisers growing control over where their messaging is displayed. Ultimately that evolution should yield greater results.”
Some observers suggested that Google’s broadened support for pay-per-action ads was directed at reducing the chance of click fraud, which reports have suggested is a larger problem on content networks than in search results pages. Murray doesn’t think that was a prime motive for pushing CPA ads, but he allows that the per-action model will make fraud harder to perpetrate. Fraudsters can still simulate the actions advertisers are willing to pay for, such as clicking on a download button or giving a fake e-mail registration; but it wonít be the swift one-click process it is now.
“I’d hesitate to say that this is going to do a lot to prevent click fraud, but the nature of the business model makes fraud less relevant,” he says.
Kevin Lee, cofounder/executive chairman of Did-It Search Marketing, says Google is probably also motivated by an impulse to poach some of the CPA ad business its network publishers are currently giving to affiliate networks—the original pay-per-action players from the Internet’s early days. “If you were Google and you looked at your current publisher set to analyze what else you see on those pages displaying AdSense, you’d see banner ads or rich media ads served by ad networks such as ValueClick Advertising.com or Blue Lithium,” he says. “You’d also see banners, text links, or other ad inventory coming from a performance-based [affiliate] network like Commission Junction or LinkShare.”
Publishers often have a lot of screen real estate to fill, but theyíre prevented from using more than two Google AdSense cost-per-click units on a given Web page, Lee says. CPA ads would let Google offer another company ad product to publishers with whom it already has relationships.
It’s not clear at this point whether the CPA ads would count against the AdSense ad cap. Lee believes they will be in addition to the two-ads-per-page limit, particularly in the case of the new text-link format.
“I think Google feels that experimenting with another ad format can only be positive,” Lee says. “They can say, ‘We already have our existing ad networks and CPC ads going like gangbusters, but we understand some marketers to have a pure performance-based deal as either a portion or all of their marketing mixócost per acquisition or cost per lead.’ This is an interesting way of trialing that.”
Murray’s firm has some clients who are enrolled in the Google CPA test, and Lee says Did-It is talking to some clients to gauge their interest in taking part. Other agencies have held off, either waiting for the inevitable bugs to show themselves or out of concern that letting Google track the clickpath from beginning to end may be revealing too much to the platform that already gets the lionís share of performance-ad dollars.
“The only way the CPA model works for Google is if advertisers are prepared to share that back-end data with Google,” says Peter Hershberg, managing partner of search marketing agency Reprise Media. “I think the larger advertisers out there, and certainly the advertisers who are working with search engine marketing firms are going to be reluctant to do that.”
Reprise was offered the opportunity to enroll clients in the Google CPA beta test, but Hershberg says the agency declined because of reservations about giving any search engine access to that customer data. “I think there’s a conflict of interest in telling the person who’s charging you for the inventory how effective your advertising is,” he says.
Lee points to another issue with the Google CPA product, at least for advertisers who also make aggressive use of affiliate marketing: the prospect of double counting. If a visitor goes to your Website through a Google CPA ad one day, picking up a tracking pixel from that path, and then lands on your site two days later through a link from Commission Junction, thereby acquiring another tracking pixel before making a purchase, both Google and the affiliate network may wind up charging you for the same action.
“That’s a risk associated with a siloed tracking system such as the one Google uses,” Lee says. “The most-aggressive marketers will also turn out to be those who most often see double-counting. As it happens, they also tend to be the least likely to let Google put a conversion pixel on their site.”
Takeup of the Google CPA format will probably come first not from these big-brand advertisers, he says, but from smaller lead-gen marketers—as long as they can have confidence that the double-counting problem is not too big.
“It’s a very similar issue to the deduping involved in list management,” says Lee. “There the third-party merge/purge houses became the solution. In the case of the online ad marketplace, the question is whether SEM firms with their own tracking technology like us become the impartial third party?” One answer might be that both Google and the SEM agency track conversions and reconcile the numbers—assuming the divergences werenít too big.
Overall, the success of Google’s test will depend on getting enough good offers into the system that AdSense publishers deem it worth the trouble to implement on their pages, and getting enough CPA-friendly pages to induce advertisers to opt into the program. It’s the classic chicken /egg dilemma.
“You could make the argument that if Google got some of its top 1000 broad-based advertisers to adopt the format, that would be enough to get the publishers interested,” Lee says. “But those advertisers are not the type who would be willing to experiment, particularly because of the double-counting problem. With a Wal-Mart or Target, the potential for double-counting is very high there.”
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