Take a look at the real deal behind Google's cost-per-action model.
Google has truly stepped out of the shadows, stopped masquerading as a quirky "do no evil" search engine and showed its teeth as the world's biggest ad agency, affiliate and ad network. Cost-per-action (CPA) pricing is a glimpse of things to come. It's not just Google pushing its CPA model; Yahoo!'s recent acquisition of Right Media has allowed the giant to offer a CPA channel for its customers as well.
The advertiser benefits for a CPA-based model are obvious. The advertiser only pays if the user takes the desired action. The publisher only gets paid when the clicks and the resultant traffic from its site generate the desired action/ conversion. The publisher is now more interested in delivering targeted and well converting traffic, as this affects its bottom line. Offering the advertisers what they want, but with limited real visibility, other than the predefined action, has been executed.
Is it a case of giving advertisers a taste of the CPA-based model in the search channel and then watching them demand more? This sounds like a simple, yet effective model, but you have to question the risk involved for the advertiser. In order for them to participate in the CPA model, the advertiser will need to add an action tag to its site, so the search engines will now have the visibility to set how much they charge for the desired action off the back of seeing what that action is worth to the advertiser. Surely, this is a conflict of interest in telling the person who's charging you for the inventory and how effective your advertising is?
Google made a vain attempt to put a positive spin on it by talking about the CPA model being an assertive step to address click fraud. If this is the case, why has click fraud been down-played so much in the past? Is Google saying that those advertisers who stick to traditional pay-per-click (PPC) activity are experiencing significant click fraud? For the masses, it is quite concerning. Anyone thinking of entering the game should be aware that things are getting very complex and there is a need for visibility, and that means powerful and impartial web analytics.
Your analytics therefore need to be able to:
- Identify click fraud
- De-dupe across multiple channels
- Enable full user journey analysis
- Enable you to understand how customers are interacting with your site
One thing is certain -- this has thrown up a plethora of questions, and Google has got everyone talking again, with Yahoo! following in its wake.
Google has had CPA referrer programmes made available to AdSense publishers for a while, and the results from the initial roll-out seem to be less spectacular than advertisers had hoped for.
Google has the potential to leverage all the benefits of CPA and to overcome the current issues it faces with affiliates. Click fraud will still exist, but its effect will be marginalised, as it is much harder to commit fraud using CPA than it is to commit click fraud.
So what's the real motivation behind this? One school of thought is that Google is trying to remove potential barriers to advertisers who are trying to use its contextual network. A contextual network is only as good as the relevance of the sites in it and the quality of the audience. Google's CPA test will give advertisers a risk-free entry to try its contextual network, with the probable intention of capturing a significant chunk of the current ad networks' slice of the online ad spend.
However, compared with the amount of advertising on the big engines' search networks, both Google and Yahoo! have seen their contextual networks exert much less pull. That's partly because many advertisers consider their ads better targeted -- and their budgets better spent -- chasing in-market consumers on the search results pages than simply latching onto keywords on web content pages.
Another issue with the CPA product -- at least for advertisers who also make aggressive use of multi-channel online marketing -- is the prospect of double counting. If a visitor goes to your website through a Google/Yahoo CPA ad one day, picking up a tracking pixel from that path, and then lands on your site two days later through an affiliate or traditional paid search link -- thereby acquiring another tracking pixel before making a purchase -- both Google/Yahoo and the affiliate network/traditional search may end up charging you for the same action. The result is mass duplication and reduction of return on investment.
On top of that, what visibility does your tracking system offer you? In other words, which channel contributed to actually delivering the customer to your site to fulfil the action? Surely, that is the real information you require in order to effectively optimise your campaign; which channel (search, affiliate, display, email) has contributed in driving customers to your site? It's imperative you have a tracking and reporting system that offers full user journey information.
Online budgets are growing month on month. It's becoming more competitive. Advertisers' reliance is becoming greater, so make sure you have impartial and powerful tools that offer accurate information from which to make informed decisions. Know which channels are king!
James Hawkins is group head of search of dgm Group. Read full bio.
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