Google is currently testing a new advertising program that pays site owners based on demonstrable post-click actions. The program, called Cost-Per-Action, was revealed via an invitation e-mail from the Google AdSense team to Web site owners.
In this so-called cost-per-action service, advertisers pay a fee only when Internet users click on their online ads and then buy a product or generate sales leads. The fees are then split between Google and web sites hosting the ads. The new service is part of Google AdSense, a program that lets web sites, such as merchant sites and blogs, show ads purchased from Google.
We are always looking for new ways to provide effective and useful features to advertisers, publishers, and users, Google spokesperson Brandon McCormick said in an email. “As part of these efforts we are currently testing a cost-per-action pricing model to give advertisers more flexibility and provide publishers another way to earn revenue through AdSense.”
The Google AdSense team would like to invite you to test a feature that provides you with a new way to earn revenue from your Web site by hosting ads that are compensated based on a Cost-Per-Action [CPA] basis, read the e-mail.
"These ads are very different in that you will be able to choose amongst a selection and you will also have more flexibility in promoting them."
The CPA ads are not designed to compete with AdSense ads, said the e-mail, as they will display across a "Content Referral" network that is separate from the AdSense network. Google also said the CPA ads would appeal to a different type of user.
Standard & Poor’s analyst Scott Kessler was not surprised that Google came out with a so-called affiliate marketing service. eBay announced a similar program last week with a service called Ad Context. Online advertising services companies such as ValueClick and DoubleClick also run affiliate networks.
"This is really about increasing accountability and measurability of internet advertising," said Rob Sanderson, analyst at American Technology Research.
An AdSense text ad, on the other hand, generates revenue for the site owner if a user simply clicks on the ad.
Google’s CPA model may provide an advertising system which companies that are not using AdSense—or have been the victims of click fraud in the past—will be more comfortable with.
In the aggregate, Google’s advertising model is a self-healing model because it is auction-based, Sanderson said. "Now, they may be trying to offer remedies to those they feel have been the targets of click fraud or who have been left out of the system, fairly or unfairly."
This is something people have been anticipating from Google for a long time, Mr. Kessler said. “It is logical on a number of different levels. They have this broad base of advertisers and a substantial number of content partners, many of whom are small web sites or blogs that use AdSense as their primary revenue driver.”
He noted that the affiliate model is a win-win for all parties involved because “you have a discernable action leading to payment.”
David Jackson, writing on Seeking Alpha, said he thought this was Google’s ValueClick killer, referring to the affiliate marketing company.
Google has greater resources than ValueClick, a larger advertiser base, and the advantage of being able to offer publishers a full range of ads based on page views [CPM], clicks [CPC] and now actual purchases or leads [CPA]," Jackson wrote.
Google can translate the performance of all these ads into "effective CPMs," allowing publishers to compare and optimize for whichever type of ad produces maximum revenue. Google is testing this program amid growing concerns about click fraud, a process wherein advertisers are forced to pay for spurious clicks on their ads.
Google recently settled a $90 million click fraud case.
Google representatives were not immediately available for comment.