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Google testing pay-per-action Adwords

It’s been rumored for a while, but it’s finally being tested, as Google has announced a beta program to test pay-per-action (PPA) AdWords bidding. The Snap search engine has done PPA for years, but obviously it is big news when Google does it. I first speculated on this two years ago when Google acquired the Urchin analytics firm (now Google Analytics), but it’s finally here. What does it mean to search marketers?


First, if you’re concerned about click fraud, this would be a way to eliminate it. As I wrote long ago, there’s no ability to create click fraud if you have to buy the item. Since then, folks have reminded me that another kind of fraud might exist, depending on how Google implements their system—crooks could click on your ad, buy your item, and then return it. Google might not refund its per-action fee. I’ve seen some references to this being called Click-Order-Return (COR) fraud, but we have too many TLAs (three-letter acronyms) as it is, so I prefer to call this “return fraud.”
Andy Beal believes that this announcement is a harbinger of Google becoming an affiliate network, just like Commision Junction. Kevin Newcomb at Search Engine Watch agrees, but Google has denied this. It’s interesting, though, because by positioning itself as an affiliate network, it would make sense for Google to have a closer relationship with affiliates than it does with advertisers, allowing return fraud to be more easily policed. You could refund the per-action fee and then be in a position of having to police your affiliates so they don’t fraudulently claim an item was returned when it wasn’t. (It’s a complicated world out there, huh?)
But if we can believe Google’s denials (Andy does not), then Google would be having a much more hands-off relationship with its advertisers (rather than treating them as affiliates) just as it does today. That would make Google less likely to refund money for return fraud, I think, but we may have to wait and see what they do.
Now understand, return fraud is a lot bigger pain to pull off than click fraud—someone has to receive the package and send it back and ensure the money was refunded, so you’d figure that it would occur less than click fraud does. My take is that, for search marketers that really want a “pay for performance” advertising model, PPA could be a godsend. No longer would you need to carefully calculate how much you should bid for traffic—now you can just provide a cut of your transaction profit (or a cut of your LIfetime Value if you are savvy) and you can be sure (in the absence of return fraud) that you are making a good business decision.
Regardless, this is an important step in the industry because advertising models should be about customer choice. You should be able to pay per impression or per click or per action—your choice. Google is trying to make it happen, which is a good thing, regardless of how it turns out.

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Mike Moran

Mike Moran is an expert in digital marketing, search technology, social media, text analytics, web personalization, and web metrics, who, as a Certified Speaking Professional, regularly makes speaking appearances. Mike’s previous appearances include keynote speaking appearances worldwide. Mike serves as a senior strategist for Converseon, an AI powered consumer intelligence technology and consulting firm. He is also a senior strategist for SoloSegment, a marketing automation software solutions and services firm. Mike also serves as a member of the Board of Directors of SEMPO. Mike spent 30 years at IBM, rising to Distinguished Engineer, an executive-level technical position. Mike held various roles in his IBM career, including eight years at IBM’s customer-facing website, ibm.com, most recently as the Manager of ibm.com Web Experience, where he led 65 information architects, web designers, webmasters, programmers, and technical architects around the world. Mike's newest book is Outside-In Marketing with world-renowned author James Mathewson. He is co-author of the best-selling Search Engine Marketing, Inc. (with fellow search marketing expert Bill Hunt), now in its Third Edition. Mike is also the author of the acclaimed internet marketing book, Do It Wrong Quickly: How the Web Changes the Old Marketing Rules, named one of best business books of 2007 by the Miami Herald. Mike founded and writes for Biznology® and writes regularly for other blogs. In addition to Mike’s broad technical background, he holds an Advanced Certificate in Market Management Practice from the Royal UK Charter Institute of Marketing and is a Visiting Lecturer at the University of Virginia’s Darden School of Business. He also teaches at Rutgers Business School. He is a Senior Fellow at the Society for New Communications Research. Mike worked at ibm.com from 1998 through 2006, pioneering IBM’s successful search marketing program. IBM’s website of over two million pages was a classic “big company” website that has traditionally been difficult to optimize for search marketing. Mike, working with Bill Hunt, developed a strategy for search engine marketing that works for any business, large or small. Moran and Hunt spearheaded IBM’s content improvement that has resulted in dramatic gains in traffic from Google and other internet portals.

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