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Google Testing Cost Per Action Ads

Seeking Alpha has the scoop on a new type of income stream that Google are approaching some publishers to test that is on a Cost Per Action (CPA) basis – ie you get paid when someone clicks your ads and then takes some sort of action (ie buys a product, gives an email address for the advertiser to follow up on etc). This is another step by AdSense towards an affiliate program approach (something they’d already explored with their referral system).

The ads do not appear in the same place as your other contextual AdSense text ads – instead you set up another ad unit for them.

What I find interesting is that AdSense are allowing publishers to actively promote these products. Check out this part of their invitation email:

“Since this is a test and these CPA ads are not regular ad units, we are giving you more flexibility in saying things like “I recommend this product” or “Try JetBlue today” next to the CPA ad unit. However, you should still not incite someone to click on the ad, so saying ‘Click Here’ is not ok.”

THAT is quite interesting and I’m sure is something that will cause a stir.

Did you get an invitation? What do you think about Google moving into CPA/Affiliate programs?

Read what publishers think about this new test in the forums at:

AdSense Testing Cost Per Action
AdSense testing CPA Ads

Update: The more I think about this the more I realise that this could significantly change things on many levels for AdSense publishers and AdWorlds advertisers. Here are a few initial thoughts as I rush out the door today (keep in mind I’ve only seen this news 10 minutes ago – hope this makes sense):

  • For example if an advertiser is given an opportunity to pay for a ‘click’ or a ‘sale’ I think quite a few of them will go for the latter option and will be willing to pay for it.
  • This could have two impacts – firstly it might bring new advertisers into the system – good for publishers. Secondly it could see less advertisers using the CPC system (not so good for publishers who focus upon it).
  • I think we’ll see some publishers working on some very convincing sales pages for products – if you’ve got copywriting skills I think you could do quite well out of this. I suspect we’ll start seeing more ‘made for CPC type web pages’ that will be very focussed upon preselling products. We’ll also see the publishers of these pages getting more into driving traffic to them using Adsense/Adwords Arbitrage (ie paying for traffic via CPC in the hope of converting that traffic to bring in higher income via their pre-selling pages).

I get the feeling things are going to change if AdSense pushes this beyond testing.

About Darren Rowse

Darren Rowse is the founder and editor of ProBlogger Blog Tips and Digital Photography School. Learn more about him here and connect with him on Twitter, Facebook, Google+ and LinkedIn.

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Comments

  1. Don M says:

    In a post a few weeks ago you mentioned that you were scared about the amount of possible click-fraud – i.e. that it is alot worse than we really think.

    I feel CPA advertising will be something advertisers will love. I know Google is walking a fine line between banning lots of publishers for questionable click behavior and appeasing advertisers.

    I, personally, am all for it. Looking forward to seeing how it is implemented.

    -dm

  2. Kashif Aziz says:

    I think CPA based ads are going to effect existing CPC based campaigns as advertisers would move towards CPA due to its cost effectiveness.

  3. Andy Merrett says:

    It’s all very well allowing active promotion of products, but how will the publisher know what ads are being displayed (if any?) I don’t see how that part is much different from putting existing AdSense ads on a page that reviews and recommends a product – whilst you’re likely to get targeted ads for that product, it’s not guaranteed. I’d only see that part working if an advertiser chose a publisher’s site to advertise on.

    It’s an interesting development that, if implemented, will impact both publishers and advertisers. As a publisher I worry that moving to a more affiliate-style model will see a massive drop in revenue – I rarely do well from affiliate programs.

    We’ll see. Time to consider more diversification. :)

  4. razib says:

    It is great for the advertisers but ot for the publishers and if Google decides to give the publishers a good share from CPA then it will work fine.

  5. Peter Cooper says:

    However, you should still not incite someone to click on the ad, so saying ‘Click Here’ is not ok.”

    I’m thinking that when this eventuall launches, the rules should be a lot more lax. Since you’re not getting anything for the click, you should be well within your rights to say.. ‘Click on the ad above and get a flight on JetBlue to support this site!’ .. as everyone’s a winner if they actually then book the flights!

  6. jhay says:

    It’s good for google and the advertisers, since they will only pay when someone does sign-up or make a purchase from their site, it will mean cheaper advertising rates for the advertisers.

    I think this will make it harder for small-time bloggers like me to earn a decent amount from adsense, since most of our earnings come from those once in a blue moon clicks. Once Adsense does turn into an affiliate program, the fun will just come to an end.

  7. John says:

    Love it. CJ, Linkshare and the like need more competition. If I could move away from affiliate networks for a Google solution, I probably would.

  8. Backup says:

    I think it would be nice if it wouldn’t be necessary to show the text ‘Ads by Google’ next to the affiliate link. This would make it much easier to ‘blend’ the links in the text.
    Tradedoubler has this for instance and this works quite well for me.

  9. Though this would be good for advertiser’s it wouldn’t be a loss to small blogs which earn by the clicks because this add will be an another ad unit so its a win-win situation .

  10. Dave says:

    Interesting. I can see that advertisers who have a tangible product to sell will love the fact that their advertising costs can possibly be cut down by only paying per ‘sale’ as opposed to per click (assuming the ‘cost per sale’ for the advertisor does not equal the sum of the average number of clicks per single sale they are currently paying).

    However, not all people using the google adwords program have something to sell, some use it to promote a service or website that has no direct saleable product. For these sites, an affiliate program is not going to be of huge benefit.

    It will be interesting to see how an affiliate program impacts publisher revenues – I’m sure that the percentage of people clicking adverts and going on to buy a product or sign up for a service is only a fraction of the total number of people who click thru. Therefore, unless the payment to the publisher for an actual sale compensates for the removal of income per click, it may not be a positive move for publishers. Of course I’m sure the financial rewards for an affiliate progam will exceed the normal click payments.

    Of course, a huge part of the adsense mechanism is not so much direct selling but marketing, and being seen, regardless of sales volume.

    Nevertheless, should be interesting.

  11. Dave says:

    And also – (I use the word interesting way too much) – its interesting that the rules for promoting these kind of adverts will be relaxed – if you can draw attention to these adverts through use of words, how about through the use of images, such as the semi-naked ladies that Darren posted about?

  12. Looks like an admission that Adsense revenue is really slowing down. Not hard to believe. The program is reaching maturation and suffers from low quality guidelines.

    The savvier the advertiser’s become, the worse off publishers may be. Really, it’s not always your fault a sale isn’t converted. This will give a discount to advertisers who can’t close sales.

  13. bernard says:

    I am not sure but I doubt that the rates for using CPA will be low since the result is there immediately vs adsense’s current approach. Advertisors will have to pay more and if I am right the cost per action will be set so that an advertisor will have to count on future sales to recoupe the costs, at least that is how I would do it if i were google to prevent advertisors hopping all over to CPA campaigns via google adsense. Hm, I hope this makes sense, just typing here in between eating lunch :)

  14. On the surface this seems like a good idea, but I think it will be ripe for abuse. Blogs will start writing bull$hit reviews praising cany product in hopes that the reference will trigger a goooglelink on the site in order to get paid for the sale, so the end result could be tons of spam blogs writing junk.

  15. John Hood says:

    I’m averse to having all my eggs in one basket. However, Google’s basket is filling up nicely! ;-)

  16. Thilak says:

    This Way or that way Google Keeps making money.

  17. I think that its a good idea will make people really step there content up if they want people to click those ads.

  18. gaman says:

    I think Google should relax the requirements a lot more about what we are allowed to say.

    In addition to placing the the ad unit in context, a publisher needs to pre-sell it. That’s the key to better conversion rates.

    After all, nobody will buy a product which cost, say $199, when all we can say is “Try JetBlue today”

  19. Jonathan says:

    Well, I do think this is very good for advertisers, however, I believe this statement entirely:

    “… it could see less advertisers using the CPC system (not so good for publishers who focus upon it.”

    Since less advertisers would be publishing ads on the CPC system that means less money for publishers using that system.

  20. @ Darren McLaughlin Says:
    “Looks like an admission that Adsense revenue is really slowing down. Not hard to believe. The program is reaching maturation and suffers from low quality guidelines.”

    I have feeling that advertisers are getting sick of clickfraud and low-quality traffic (i.e from AdSense for Domain Squatters, and Made for Adsense sites). The solution for this problem is to only pay for usefull clicks and pay well for them. Hence the existance of CJ and other affiliate programs.

    How much do you think the mesothelioma lawyers are paying for clickfraud?

    Of course the problem with affiliate programs is that they often don’t convert well. For example my amazon.com links and banners have converted so poorly, at this point I only keep them around for aesthetic reasons.

  21. Mark Price says:

    I think CPA based ads are going to effect existing CPC based campaigns as advertisers would move towards CPA due to its cost effectiveness.

  22. Ian Anderson says:

    This is very worrisome for me. I’ve had absolutely no luck with pay per conversion ads. I’m sure Google will do a better job at it than the players today. After all, if I don’t make money, they don’t make money.

  23. El Hakeem says:

    Google is obviously pandering to advertisers at the expense of publishers.

    Advertisers obviously love pay-per-action. They only shell out when somebody buys something. This dramatically increases the efficiency of their marketing spend. It also gives them a lot of free brand-building publicity.

    They don’t pay for displaying their ads even though this builds brand awareness and mindshare for them. They don’t pay when someone clicks, even though this represents heightened interest in their product. The publisher’s site is basically a free billboard for lots of advertisers. And who doesn’t love free advertising?

    However, why should a publisher display somebody’s ads for free on their valuable real estate? Imagine an outdoor billboard for which advertisers paid only when someone bought something. It would be highway robbery.

    I expect Google to go ahead with this. I also know the market will bite them in the behind eventually. If they abandon pay per click entirely, they will leave room for other, competing PPC advertising services. Personally, I would switch from Adsense in a heartbeat if my site is going to become an unpaid billboard for some tight-fisted advertiser.

    For publishers, the best deals in order of attractiveness, are: 1. Pay per impression, 2. Pay per click, and 3. Pay per action. For advertisers, it’s in reverse order. So Pay per click is the happy compromise, the win-win for both. Once Google loses its near-monopoly position, the market will equilibrate around pay per click.

    I never thought I’d be glad to see Microsoft coming out with a new product.

    http://www.amusis.com

  24. Jacob Reiff says:

    In reference to #24 above — yes, your site does turn into an “unpaid billboard” of sorts, if you put up ads that have low relevance to your audience.

    The benefit of CPA to publishers is that you can get a much bigger piece of the pie. If I send somebody to a $200 product via PPC, I might earn anywhere from 10 cents to a few dollars. I make money on the click, regardless if they purchase nothing, the product I sent them to look at, or that product plus more. Depending on the vendor, with CPA I can earn a much higher percentage of the sale, plus if they do a good job on their end with sales in their ecom store (cross-selling, etc) I earn a percentage of all of those products as well.

    So with ads relevant to your content, you have the possibility of making more money. Of course not all content is written for users in a buying state of mind — which to me, is where PPC works best for the publisher. You’re still relying on errant clicks, random user thoughts of “what’s that, lets find out” to make a few pennies/few dollars. (Nearly) All ads are selling something — if your site doesn’t have people in a buying state of mind, you’re going to struggle to monetize regardless of the advertising method used. (Unless you have a ton of traffic and can make it on impressions alone.)

  25. Shirazi says:

    The costly ads in print or on TV do not determin the action. They just keep the product or what ever in front of the audiences. No?

    At the moment Google is having great advantage through CPC. Google will not increase revenue if CPA is launched, I think.

  26. Shirazi says:

    They could tighten their CPC system against possible click fraud instead.

Trackbacks

  1. [...] A move towards CPA (Cost Per Action) ads could deliver a hurting to Adsense publishers. CPA ads are very attractive to advertisers because they lower their cost of acquisition for leads or sales. However, there’s a big flaw inherent in this type of set up: it’s not always the publishers fault that the end user doesn’t convert on the advertiser’s end. In fact, a lousy landing page ensures low conversions, which means publishers will be punished for an inept marketer’s miscues. [...]

  2. [...] Google Testing Cost Per Action Ads at ProBlogger The ads do not appear in the same place as your other contextual AdSense text ads – instead you set up another ad unit for them. What I find interesting is that AdSense are allowing publishers to actively promote these products… [...]

  3. [...] Sites como o ProBlogger estão analisando a situação. No Digg, chamam de “morte do AdSense“. Vamos ver como funciona o modelo atual do AdSense: [...]