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

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.)

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

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.

“… 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.

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”

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.

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.