One of the big pieces of news this week was Google announcing their CPA (Cost-Per-Action) product, or as they're calling it - PPA (Pay-Per-Action). There are good analysis posts about the news from Techcrunch and Microsoft's Don Dodge. It's been expected for some time now that Google will move into CPA, as a lot of people in the industry view CPA as the holy grail of online advertising. But to step back a bit -- what is CPA? As Ebrahim Ezzy wrote on Read/WriteWeb last August:
"In contrast to the CPC Model, which seeks to drive a high volume of traffic to the advertiser, the still-emerging CPA model provides action/acquisition opportunities by offering financial incentives - usually in the form of a revenue share percentage - to publishers. Incentives are solely based on actions such as acquiring qualified database entrants (e.g. opt-in email), driving sign-ups, downloads, inquiries or ultimately acquiring paying customers."
Ebrahim also noted that CPA is optimal for advertisers, but it is a risky proposition for publishers. Therefore Google will be able to charge a lot more to advertisers for CPA. It's also important to note that Google is far from the first to move into this space - affiliate advertising networks like Commission Junction and LinkShare have enjoyed good revenues from it, plus web companies like Snap and Turn. However Google’s presence validates CPA in a big way.
To my mind, the big question (apart from will CPA actually work?) is how will Google's main competitors in online advertising respond? As Ebrahim wrote back in August, Google's competitive advantage is its network size. So really the only companies capable of competing with Google in CPA are Microsoft and Yahoo.
Will Yahoo's Panama have CPA? I haven't found any confirmation of that, but John Slade (Senior Director of Yahoo Global Product Management) told Lee Odden in December that Yahoo wants to "define a standard business goal like Cost Per Action (CPA), then let the system automatically find the most cost-effective way to deliver against that goal". Which sounds very vague...
What about Microsoft and their much vaunted new online advertising platform, AdCenter? Once again there is little information on this. I'd love to know Don Dodge's view on it.
For now, Google looks to be the most advanced of the Big 3 in terms of CPA / PPA. So this means that Microsoft and Yahoo will have to scramble (again!) to catch up with Google in online advertising, or else they'll need to do some acquiring. Perhaps all is not lost for the likes of Commission Junction just yet! What are your thoughts on this?
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I tend to think Microsoft and Yahoo! need to concentrate on getting their offerings in CPC up to snuff before they try to take on Google full force on every ad type.
Google is the most advanced in CPC, too! Microsoft and Yahoo are still scrambling in that regard (I speak from a publisher point of view more-so than an Advertiser one, by the way).
If Microsoft or Yahoo do decide to acquire a company like Commission Junction, they should pull the trigger then sit on integrating it directly into their offering until they get their CPC stuff in order. (CJ, et. al., already function well on their own, and trying to stuff them into a faulty set up could cause more harm than good, in my opinion.)
Posted by: Josh | March 22, 2007 4:03 PMIt seems like just as Yahoo was finishing the CPC marathon (assuming Panama lives up to the hype) Google took off in another direction with CPA.
Google's key advantage with CPA could be the integration with Google Checkout. If Checkout takes off, then Yahoo's in trouble with trying to catch up on CPA because it can't just buy into the race and be as effective as Goog.
Any theories on why Checkout hasn't been more successful for Google? Seems like there'd be a low barrier to switch from Paypal to Google?
Posted by: adam | March 22, 2007 5:24 PMCPC will still be king and there is no need for Yahoo or MSN to be that worried. CPA/PPA only make sense when there is a well defined "purchase" action that can be directly related back to the original click-thru and for many/most Adwords advertisers that is not the case. The beauty of CPC is that every Tom, Dick or Harry can put $10 into Adwords and have potential customers coming to their landscaping, dental, car repair shop, etc website in minutes, but none of this traffic lends itself to the CPA/PPA model.
Posted by: SEO Mash | March 22, 2007 6:39 PM@Adam #2: My only experience with Checkout thus far (last November) was a terrible one, which led me to believe that Checkout is just still a very young service without all the kinks worked out. PayPal, by comparison, is a very mature service with great merchant tools, a lot of third party support, protection for both buyers and sellers, and of course, integration into eBay... one of the world's largest Marketplaces.
I don't think Froogle every really took off for Google (I have no readily available stats to back me up, and no time at the moment to check, but I'd guess it still lags behind Shopping.com and PriceGrabber, etc.)... So Google just doesn't have much of a foothold in ecommerce at all.
Posted by: Josh | March 22, 2007 7:03 PMSo, as a publisher .... should I accept Coca Cola CPA ads in my website ?
So I only get paid when the visitor clicks in the add and buys a Coca Cola bottle from the seller website ??
Yeah, right !!!!
CPC is already bad enough, and the big sites are already escaping from it (look at RWW itself). Impressions combined with CPC is what will happen at the end, and a very small niche of CPAs.
Posted by: hombrelobo | March 23, 2007 2:50 AMWho cares if Microsoft or Yahoo get into it, its too late already. They are just getting their CPC stuff in order now, by the time they get round to it Google as usual will have 90% market share and they wont be able to make a dent into it. Surely this CPA stuff is really obvious for them to get into? an interesting post would be to examine why the hell Microsoft and Yahoo are so slow to take the initiative on this, and everything else that Google has won on in the past few years.
Posted by: Bob Jones | March 23, 2007 6:00 AMPersonally, I only publish pay-per-lead and pay-per-click ads, and I have never found Commission Junction to be particularly user friendly. I do best with Adsense and Clixgalore. I do not work for commissions on sales. (In the real world, salesmen who work for commissions on sales receive discounts, coupons, free product, samples, party favors, free lunches, etc.)
Posted by: David | March 23, 2007 6:52 AMPersonally, I only publish pay-per-lead and pay-per-click ads, and I have never found Commission Junction to be particularly user friendly. I do best with Adsense and Clixgalore. On the Internet (on my websites), I do not work for commissions on sales. (In the real world, salesmen who work for commissions on sales receive discounts, coupons, free product, samples, party favors, free lunches, etc.)
Posted by: David | March 23, 2007 6:53 AMWhat I meant to say, is that compared to the real world, Advertisers who pay commissions on sales (and networks like Commission Junction) are really quite cheap: they do not provide their salesmen/publishers free product, free lunches, samples, coupons, discounts, parties, opportunities for advancement, etc.
On the Internet, in addition to pay-per-click, I publish pay-per-lead ads, but never pay-per-sale ads.
A lot of these advertisers are hoping to pay publishers "Third World" wages. After all, what is the minimum wage in Nigeria and Indonesia?
Posted by: David | March 23, 2007 7:01 AMI think its a very bold step what Google have done here, what made Google gazillions that it is worth today is the ppc model of advertising, click fraud or no click fraud every click = $, I can well understand why google wants to head towards the cpa model as this would literally kill of click fraud overnight, and why wouldn't advertisers wants it to be this way too.
The problem I can see is that how much is it going to be making for everyone involved, for advertisers its a win win situation, but for publishers this spells bad news as far as I'm concern, a lot of visitors normally click the ads that catches the eye, that in itself is awareness and branding of the product or the company involved, but I won't get a penny for advertising their company, branding or products if someone decide not to buy or rather still keep a note and buy it on a later date because they had seen the product or services through my site, This will force a lot of publishers to switch over to alternatives and I can well understand why MSN and Yahoo have not taken up the initiative.
thats enough ranting for 1 day i think :-o
Posted by: kenny | March 23, 2007 10:30 AMCJ will feel very badly.But i think google's CPA shall more powerful and more profitable.
Posted by: doepay | March 23, 2007 2:25 PMSeriously people - there are so many issues around CPA that it's not a likely option for many years to come, and that's why Google is not testing it on it's own network, and only on adsense publishers, because it's not their traffic.
I have posted my detailed views here : http://www.vinnylingham.com/2007/03/google-launches-pay-per-action-cpa.html
Posted by: Vinny Lingham | March 23, 2007 2:44 PMAs a manufacturer, I can tell you that I sure hope that Yahoo and MSN will follow suit. So many publishers have come up with ways to create click dollars using schemes that take advertisers money without any intent/concern of delivering an interested reader that the cpc model is going to be killed off by publishers not realizing this is a 2 way street.
After seeing some of the incentive sites that pay readers for clicking on ads and other sleazy methodologies designed to basically defraud advertisers without violating the Google/Yahoo/MSN rules I drastically reduced my cpc advertising $'s and moved heavily into cpa.
Maybe our company is oldfashioned, but we believe in treating others fairly and expect to be treated fairly in return. So our cpa payout was calculated to pay publishers a good return on their traffic (percentage of average sale amount of $82-85 with sales rate of 1.5 - 1.7% of visits). By not having to pay the CJ/LinkShare advertising costs to recruit advertisers AND CJ/LinkShare an additional 20-30% commision on commision paid to the publisher, we will be able to dramatically increase our cpa percentage. The result will be more money ending up in the publishers pocket and my company not having to worry about being defrauded out of business.
This can be a boon for American manufacturers and jobs. I hope legitimate publishers will give it a chance. If you are such a publisher check us out www.wallpaperforwindows.com
Posted by: Larry Wade | March 23, 2007 8:39 PM