Big news today is that Google has a beta program for a new advertising service based on cost per action (the service is called "Pay-Per-Action"), which Google defines as "a new pricing model that allows you to pay only for completed actions that you define, such as a lead, a sale, or a pageview, after a user has clicked on your ad on a publisher's site." It's a model that many expected Google to adopt -- the margins for CPA, theoretically, are quite good -- and perhaps Google is feeling confident that the market is ready. Remarkable thing, from my perspective, is that CPA is a Bill Gross idea -- the same guy who pioneered contextual advertising long before Google began its extraordinary experiment in that realm. Didn't see Bill's name in the blogs I read today, but I'll be watching. In the meantime, Elise Ackerman at the San Jose Mercury News, had this to say:
Other search companies are also experimenting. Last year, Bill Gross, the entrepreneur who pioneered the pay-per-click business model, relaunched the Snap search engine with a pay-per-action option. But Snap lacks Google's massive audience.
``Google's distribution network instantly makes it a potential leader,'' Benjamin Schachter, an analyst with UBS, wrote in a research note on Tuesday morning.
There are some people who felt that Bill Gross was cheated out of a moment of glory during the online advertising revolution. Not sure that's true. But if CPA takes off, I hope we will hear more from him.
UPDATE (3/21): A big question is whether the Google program will hurt affiliate marketing networks. Mike Arrington writes:
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.
Nice to point out that the brilliant Bill Gross has been working SNAP for some time, correctly noting that pay per action will eventually replace the flimsier PPC model. But it's hard to credit anybody in recent history with the "idea" of pay per action, which has been a common ROI measure in many forms of advertising for many years. He just put some tech behind that idea.
Posted by: Joe Duck | March 20, 2007 at 09:24 PM
Thanks, Joe. You are probably right. Very little is completely original in the world of ideas. Something I have been saying, and in my admiration for Bill, I forgot. :)
Posted by: Giovanni Rodriguez | March 20, 2007 at 10:12 PM
Speaking of affiliate marketing has anyone heard of Secret Affiliate Code it set to release really soon. I think it is going to be really beneficial for a lot of struggling affiliate marketers out there. Craig Beckta is a really solid guy and I am looking forward to helping promote this. Check out my review
Posted by: The Secret Affiliate Code Review | June 02, 2008 at 05:53 PM