This week Google announced the launch of a limited beta test of cost-per-action (CPA) advertising. CPA means that the advertiser only pays if the user takes a specific action pre-defined by the advertiser, such as signing up for a newsletter, downloading a white paper, etc. If CPA proves to be anywhere near as attractive to advertisers as cost-per-click (CPC) advertising has been, hold onto your hats, because this has the potential to re-shape the whole world of advertising yet again.
I have maintained for several years now that CPC advertising drove a huge shift in risk from advertiser to publisher. In survey after survey, we found advertisers using word like "fairness" to describe how they perceived CPC advertising. Advertisers said they were tired of what they saw as a "you pay your money and you take your chances" advertising model, and liked the fact that CPC advertising was both risk-free ... and fair.
Of course, as CPC evolved, advertisers quickly discovered that the only guarantee in CPC advertising was a click-through, and that's a far different thing from a lead or a sale. Throw click fraud into the mix, and CPC's reputation as a risk-free Nirvana for advertisers starting looking a little ragged on the edges.
Enter CPA. With measurement of performance under the advertiser's total control, it should be risk-free, fraud-free and produce a guaranteed and completely measurable ROI. What's not to like?
What's in it for Google? It appears that CPA advertising will be sold on a true auction basis, and since CPA produces guaranteed results, advertisers should be willing to pay more, a lot more. Also of interest, at least for now, CPA ads will only run on third- party sites in the Google network. Site owners will be able to pick and choose which ads to run. The ones that pay more are more likely to get selected, putting more pressure on advertisers to bid up their prices.
It's too early to predict if Google CPA will take off, especially with the structure of this beta launch, but the bigger issue is that CPA represents a further shift in risk from advertiser to publisher. What really concerns me is that we hear so many advertisers already talking about how they can't wait for CPS -- cost-per-sale -- also known as "I'll pay you if I sell something." CPS is a swamp for a lot of reasons, and it represents an unreasonable total shift of risk to the publisher ... and sorry Mr. Advertiser, that's not fair.
Labels: cost-per-action, CPA, google, online advertising