Google Pay Per Action Reaction

With Google’s announcement that pay-per-action (PPA) ads are launching beta (on AdSense) the world of optimization and analytics may be forever changed, or not. As it works, you get to name your price and it will be Google that is measuring conversion and optimizing the serving of ads based on PPA.

This becomes a real game changer if this model ever hits the SERPs. That would effectively squash affiliate marketing as we know it and roll it up into SEM. I don’t think this will happen for three reasons.

1. Advertisers are already getting incredible ROI from PPC on the SERPs.
2. The click fraud problem in the SERPs is overrated.
3. Google has a great formula for revenue and profitability with PPC and Quality Score in place.

At the outset, while an incredibly interesting and somewhat predictable development, it is not going to have much of a factor in the worlds of SEM and Affiliate Marketing. This is simply because with a few exceptions conversion (or action) rates on contextual ads are very low. The net impact may be that more of these ads are run because marketers that had turned off these campaigns due to high CPA and will now activate them again with this model available. This will give Google a lot more contextual ad inventory though I’m not sure how they will leverage this.

No question that part of Google’s PPA/CPA strategy is to drive Google Analytics adoption. For reporting reasons it is required that you have GA to participate. I have been hearing some mixed commentary for months on how well Google is doing with both GA adoption and support to their install base, including the Website Optimizer. They have certainly made this a priority internally as there have been a slew of new hires and some big names brought on board as well.

Part of their GA strategy may be to have SEM agencies to start using GA instead of their own bid management tools. I’m aware of at least one agency that recently bid on an RFP that included GA and Website Optimizer as part of their package even though they have their own bid management software and they are not an authorized support partner of either Google service. This strikes me as not a good direction for any client to take. There are some interesting dynamics for businesses to start sharing their critical customer acquisition costs with Google.

I do applaud Google’s desire to continue focusing on relevance and optimization. Mass adoption of PPA would dramatically lower their short-term AdSense revenue, a key component of their earnings and profitability. Possibly the successful adoption of Quality Score from a revenue generation perspective has made this idea practical. Of course there is also a huge anti-click fraud component to this strategy.

The strangest part of this entire announcement is the introduction of a new ad format for Google, text links. It’s fascinating to me that Google would roll this out without any known testing since beta for Google means a formal release for anyone else. Text links in themselves have always been a high performer for purposes of click through so these may actually work pretty well. According to Google the infamous “Ads by Google” will appear on a mouseover of the link to let users know it is an ad but this still seems to run counter to so much of what Google espouses about ads and user experience. First off it is interruptive without being helpful. Second, you do not know who bought the link or where the link takes you. Likely these links will be used to fool visitors into going to a site much the way AdSense currently preys upon unsuspecting web neophytes. If anything is a shot at the heart to the affiliate networks this is it.

Nothing like having your future held in limbo by Google, but then again, don’t we all?