Google's New PPA Advertising
Today Google announced a Pay Per Action beta test destined for their adsense contextual advertising product. In essence, PPA does not incur a cost to the advertiser unless the visitor takes an "action". This could include a purchase or completing a form.
Needless to say, this has lots of Search Engine Marketers, Publishers, & Affiliates buzzing about what it means to the industries.
Nothing... yet.
However, it could become significant in a number of ways.
Some see an opportunity for smaller advertisers to begin advertising online as they would not have the risk of click fraud. Advertisers could determine what their profit per visitor is & then bid a percentage of that profit for a PPA advertisement. It's measurable.
Assuming PPA grows beyond the content network into the search network, the advantage over PPC still eludes me, though. Search engine marketers do this all day, every day with CPC (cost per click). The really scientific ones could tell you conversion rates & revenue per visitor by keyword & time of day. Most of the time this can be done without surrendering conversion rates to a third party like Google.
PPA requires conversion tracking in order to count an "action" (and charge the advertiser). Congratulations. Now another company has almost as much information about your online business as you do... and the resources better analyze the data.
While the PPA Advertising option is in beta & limited to the contextual network, I wouldn't bet on it staying there. If there is any indication that Google can increase profitability by expanding this, it will be scaled. Increase profitability... that's a clue.
Companies spend money to make money. The enhancements that Google has offered with Conversion Tracking, Web Analytics, etc. are given away for FREE (!) despite their development & maintenance costs. The true cost to advertisers is data. Nothing is free.
Some say this is the end for the Affiliate networks & aggregators or even the end of CPC - probably not... but truly it's too early to know if or how this will be adopted.
In the interim, I'm staying on the sidelines & building Content.
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Click Fraud
Eric,
You mentioned click fraud in your PPA post today and I have a question about the true cost of click fraud to PPC advertisers.
(1) Do you know the industry average return-on-ad-spending for PPC advertising? One source I read said it was 105%.
(2) Using the above figure, isn’t the true cost of click fraud then the real-time budget depletion of a fraudulent click, plus the lost opportunity of that budgetary investment not having the chance to get a 105% return? For example, $1 of click fraud is really a $2.05 loss?
Thanks,
Thomas
Click Fraud
Hi Thomas,
Thanks for the reply.
105%?
I'm not sure how someone would pin down a number like that. I know in my own case, I would never divulge all of the numbers... though I might share the results of a limited traffic test. Beyond that, nobody but me & the acountant understands the full picture. The 105% number (as an average) strikes me as unverifiable. Obviously it would vary dramatically by industry, ad quality, , marketplace, etc.
Regardless, using that number as an example, you would be absolutely right. The opportunity to earn 1.05 with that original dollar has been lost when the dollar itself was lost to click fraud.
As it relates to PPA, (avoiding) click fraud is probably the biggest selling point to push the program. I can see how it would be a draw for newer advertisers in particular. My own strong preference as an advertiser is PPC. Pay Per Click is market driven in that if the traffic quality is better or worse - bids can be adjusted accordingly without a need to share proprietary data.
Eric