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Tuesday, March 20, 2007

Google Expands Pay-Per-Action Test

Google has been testing a "pay-per-action" ad model since July 2006.

Today they're announcing a wider rollout of the service, but still in "limited beta release."

In a brief chat yesterday with Rob Kniaz, product manager for Google advertising products, I learned that AdSense publishers will be able to add the pay-per-action units in addition to their current AdSense (CPM or CPC) ad units. They'll be able to shop for potential offers in a variety of ways, either by selecting a specific advertiser's offer or by incorporating keywords into their code and letting Google's system smart-match from their advertiser list.

From the advertiser side, there will be a dedicated interface that allows them to upload creatives as well as the parameters for payout (eg. $3 per sale; $35 per lead, etc.). I'm waiting to see the full implementation, but at this early stage it looks like there will be a couple of things to look out for:

  • Verification of the actions is a key concern. I always argued that cost-per-action was no panacea to the verification issues around CPC or CPM based advertising. To be sure, you can't fake a sale if money changes hands, but a no-good publisher or random vandal could certainly potentially generate low-quality or fake leads. As with pay-per-click, it's not quite good enough to argue that advertisers should lower their bids accordingly, since the impact of bogus activity could be quite uneven.
  • How are these outcomes going to be tracked? I assume through Google Analytics, Google Conversion Tracker, or Google Checkout.
  • As such, it does certainly expand the Google footprint in all of these areas. It also confirms that the introduction of products like Checkout were not disjointed experiments but rather part of a broader overall strategy that is only being shown to us gradually.
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. Put another way, it allows merchants to set up an "affiliate program," but with considerably less hassle than with other affiliate systems.

To be clear, the cost-per-action test has nothing to do with the search results or ads next to them. It's an additional marketplace being built to facilitate cost-per-action ad payments between AdWords advertisers and AdSense publishers.

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