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Thursday, June 22, 2006

Google "Cost Per Action" Advertising: Only Pay for Sales

Posted by @ 5:59 pm

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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Rene LeMerle Rene is the marketing manager of - a global search engine marketing company. He also leads the marketing for - a web 2.0 style community for online and digital marketers. Rene has been in the industry since 1997 with much of that time spent helping businesses embrace the best of the internet and digital world.

View Rene LeMerle's profile

Discussion (8 - comments)

This is a great idea for businesses to be able to advertise and get results. I have been using Adwords since about mid May and during our entire campaign we have not received a single conversion for the $100+ dollars that has been used for the advertising. Even though this was free due to promotion codes from our reseller account purchase it highlights how the current model is flawed and causes advertisers to burn money for nothing. We are about at the end of our “free money” so if Google gets this going then they would keep us as a customer. Hopefully this would be a better fit to generate sales since we are on a very tight budget and do not have money to burn.

By Kevin Thornhill - June 27, 2006

i am waiting to see if google gets this going i have a feeling that they will,i will certainly be a customer,sadly i havnt been invited,yet! i have friends who also have had no luck with adwords,this is an expensive way to waste money,trying to generate sales,most poeple are on a tight budget nand need to get sales and leads from the advertising. .

By lynne ireland - June 27, 2006

This is really interesting! Finally us website owners can really get a better ROI!
Is there a way to get an invitation? We spend about $3,000/mo in AdWords, but we haven’t been invited. We’d really like to test-drive this service.

By Anonymous - June 27, 2006

The cost per action model advertising is a great point for the advertiser like us. We have been using google adwords since November 2005 and have received more clicks than sales. I hope this will be launched soon and will cost less for the advertiser.

By bonav - June 28, 2006

Sounds like an workable (and therefore radical) idea but needs some thought regarding a possible ‘scale of result’ or weighting algorithm. For example, a newsletter subscription is not as valuable as an order placement. Also, block the advertising spam abuse potential as much as possible. For example, I am using your comment box to promote a product, thank you for this one.

By Adrian - June 28, 2006

sounds like a real quick, easy, cost affective way to take my small business big.

By Anonymous - June 29, 2006

About time too. Adwords has been corrupt for a long time and the numbers don’t add up. The publisher gets around 25% of the click value, the rest goes to google, no wonder they are not too bothered about conquering click fraud, which must inflate click costs by around 30%, probably worse in some market sectors. Now, where’s my invitation? :o )

Get Out Of Debt

By Anonymous - July 18, 2006

Its a very good idea, especially for a business that I maintain. We generate real estate leads, which can be up in the range of $2.00 – $5.00 per click. Its hard on our ROI with click fraud.

So guarantee us a real lead with $2.00 – $5.00 clicks would save my companies thousands a week.

By Anonymous - July 18, 2006

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