Google announced a Pay Per Action (PPA) advertising program yesterday as expected. Google has always used Cost Per Click (CPC) ads where advertisers only pay when a user "clicks" on an ad. Advertisers loved it because they were tired of paying for display ads, sometimes called brand banner ads, and never knowing if anyone looked at them. CPC ads were a huge improvement over banner ads but then click fraud started creeping in.
Google has taken advertising to the next level by introducing Pay Per Action ads where the advertiser only pays when the user takes a specific action like filling out a form, entering an email address, or downloading a file. Of course Google will charge a lot more for PPA than CPC since the PPA lead is worth more money.
Will PPA cannibalize Google's CPC revenues? Other blogs are screaming that the new PPA program will kill affiliate advertising networks like Commission Junction and LinkShare. Maybe so, but isn't the bigger threat cannibalizing their own CPC customers? I'm sure there will be some of that, but my view is PPA will attract more advertisers and make the "advertising pie" larger. Time will tell.
PPA will generate huge revenues per ad. Advertisers pay more for CPC ads than CPM (Cost Per Mil) banner ads because they get a better qualified lead that has actually clicked on the ad. With PPA they will pay even more, a lot more, because the user (lead) took a specific action like filling out a form. The other major on-line ad networks don't offer PPA ads so Google will have the market to themselves for a while.
PPA will be attractive to the highest cost CPC advertisers. My guess is that the very top of the CPC market will gravitate to PPA ads. Mortgage loan companies and automobile advertisers now pay the highest CPC rates, sometime $4 to $10 per click. These are very expensive clicks to get someone to read your ad. Why not filter out the curious ad clickers and just pay for the serious ones that actually fill out a form? These advertisers might be happy to pay $40 for a PPA that fills out a form. Multiply this by the millions of people every day looking for a loan or new car and you can see why this will be a very big business.
Spammers and Click Fraudsters will attack. Wherever there is money fraudsters are soon to follow. They will figure out ingenious ways to trick people into taking actions so they can collect the PPA revenues. The Spammers "cat and mouse" game has also just been taken to another level. There will need to be systems in place to verify the data entered into a form to make sure it is a valid action. They will need to verify that email addresses are valid or IP addresses for downloads are legitimate. You wouldn't believe how sophisticated these on-line fraudsters can be.
How long before Google gets into on-line Coupons and Discounts? If you look at the traditional advertising market, coupons and discount cards are another huge, fragmented, and inefficient market. Google is a master at exploiting huge, fragmented, inefficient markets. Radio and newspaper advertising fits the description too, and Google is already there.
Google is best known as a search engine, but it is really an advertising company.