Hot on the heels of eBay’s new contextual advertising system debut, Google is testing a new “Cost per Action” advertising model.
Currently AdSense is based on a “Cost per Click” basis which means that advertisers are charged when someone clicks on their ad. AdSense, like other Cost per Click programs, is highly susceptible to abuse, be that deliberately from competition, unscrupulous publishers looking to improve their returns, or just click happy browsers.
While much effort has gone into preventing and addressing click fraud, unfortunately in a not so perfect world, the problem still exists and is a concern for advertisers conscious of their marketing spend and ROI.
The new Cost-per-Action model, which is the basis for eBay’s AdContext and Google’s current testing, means that advertisers will only incur charges when orders have been placed, or specified actions have been undertaken (i.e. Sign-up to a newsletter).
This concept is nothing new, as affiliate programs having been using this system for years, but it is the first time that large scale contextual advertising systems have explored the action based system.
While Google’s testing is reserved to an exclusive invitation only group at this stage, it does represent a positive move for their current PPC advertisers.
Action based systems generally provide better ROI for marketers, but it will be interesting to see how AdSense publishers react. Unlike the current pay per click model, action based systems will probably generate less regular revenue for publishers, but the commission could provide a reasonable trade-off.
The downside is that publishers have no control over conversion on advertiser’s websites, which could mean a lot of free advertising with no real returns. Google suggests that the action based system won’t replace their existing AdSense system, but will be an additional service if and when it is officially launched.
Is this the revitalization of affiliate advertising in a more relevant and targeted form? It would appear so…
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