Pay Per Action vs. Cost Per Click vs. Brand banner advertising

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.

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Comments

[Steve Morsa]

...and why am I not at all surprised by the cacophony of breathless news reports and blog entries detailing this wonderful, "brand new" and oh-so-exciting (yet future patent-infringing) PPA advertising program/platform...that's been readily available from others (oops!) for no fewer than two full years...

Ahh...the unbridled joy and myriad benefits of being a media darling in the Internet age...

[Marcela Shine]

Steve is right - none of this is new. But because the giants are talking about it, people listen. I'd like to know how they plan to manage fraud in all this, particularly in the auction-based cost-per-action business model. We have been pointing out this issue in our own blog for weeks now. Would like people's thoughts on this.

[Ad Com]

Hmm, I don't believe in this pay per action thing. REASON: Some companies could use it for institutional advertising:
For example, Coca Cola drives on it's website masses of visitors and action is to buy CocaCola online, very few people will do it, but many will get advertisement from Coca Cola. Will see how will Google implement it.

[Daniel Mcgonagle]

Thanks for that wonderful comparison and review of PPA, CPC and Banner ADs. People are getting so much of the PPC hype these days. This post made a crystal clear explanation as to what works best.

[Mary]

Pay per click system is quite profitable at https://valary.com
They have high bids, detailed statistics, pay at the right time, provide all the necessary information, NEVER shave!!!
I advertise pills- quite a good business I would like to say. Check their site- they have all the required information!

[Easy SEO Blog]

There are so many different software packages out there really. I use SpyFu for free results, someone who generates a great percentage of their revenue off of pay per click might consider something like PPC Web Spy. I have an article on my blog about analyzing your competition that covers this topic a little more thoroughly.

[internet affiliate program]

However, being in this kind of a business requires more than just sales skills. You should have industry knowledge and the acumen to differentiate between the genuine and fake. Your success or failure will depend on choosing the right internet affiliate program and affiliate promotion strategies.