Is Cost Per Action A Big Deal?

from the not-really dept

Thu, Jun 22nd 2006 5:23pm — Mike Masnick

There's a lot of talk today over Google's official announcement that it has begun testing "cost-per-action" ads as opposed to their more traditional "cost-per-click." As all the news reports note, CPA ads are a way to combat clickfraud, since clicking alone has no benefit. This isn't a new idea. A year ago, we explored whether or not cost-per-action ads were the answer to problems facing the CPC space. Of course, by calling it CPA, most of the press leaves out the fact that CPA ads are no different than the traditional "affiliate programs" which were much more popular than CPC programs in the late 90s before Google (and, to a lesser extent, Overture) revolutionized the CPC model. However, the truth is both models have their problems. CPA ads are useless for certain advertisers who have no immediate "action" to provide. They also ignore the value of brand building (which can also be true of CPC ads if people don't click) where people may simply learn about a company via their ad without clicking or taking action, but will remember the brand at a later date. All this really helps show is that CPC is not the only answer, and never has been. Google is just looking to add more options -- which have their own pros and cons.

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8 Comments

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Anonymous Coward, 22 Jun 2006 @ 5:43pm

CPA offers SOME advertisers now buying CPC on Google a better alternative. Whether it will prove to be a workable remains to be seen. Standard CPA verification methods are more complicated than CPC buying and how that will be handled will determine acceptance and success. In any case, it should be interesting to see how it plays out.
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- Rick, 22 Jun 2006 @ 7:25pm
  
  Re: CPA
  The main issue with CPA is 'small website' aka the VAST MAJORITY of web content generate little to no income on CPA ads. Hence, the average web site owner or blogger will not want to run CPA ads, decreasing the advertisers exposure dramatically.
  
  It's all a tradeoff.
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Anonymous Coward, 22 Jun 2006 @ 9:06pm

"Hence, the average web site owner or blogger will not want to run CPA ads"

Not necessarily. It does mean that the advertising and the site content must be much more tightly matched, but since the CPA pay-out can be a lot higher than CPC the right match-ups can be very profitable for a publisher.

In any case, it will be a separate network so it's not a simple pick one or the other situation.
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Anonymous Coward, 22 Jun 2006 @ 10:24pm

Do people actually click these things? I don't think I've purposefully clicked on a banner since the first day I went online and tried to "hit the monkey" for a tv or something. As soon as I realized it was an ad, and an ad in fact that was for more ads prompting me to sign up for all kinds of services, my brain tuned out all things that shape. Advertisers need to wise up to the fact that consumers don't appreciate loud obnoxious ads on TV or on the web. CPA ads won't work unless they give the reader a reason to click, like a limited time % off discount code or a bonus item with an order.

Although maybe a move to CPA will stop the annoying practice some webmasters have of plopping the ad on top of the content in hopes that you might accidentally click on it while you're trying to close it. That would be nice.
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Jean Thibaudeau, 23 Jun 2006 @ 1:31am

Two choices is better than one. Maybe CPA isn't a big deal, but it gives a choice to businesses more interested in fast sales than branding.

http://collaborativemarketing.blogspot.com/
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Mr. K, 23 Jun 2006 @ 7:00am

Do both
I hope Google sticks with both models (click and action), and pay more for the ad clicks that result in an action. What really should be done with is identifying sites that are trying to game the AdSense system and eliminating them from the program. It's not just a matter of finding fake clicks. It's a you-know-it-when-you-see-it thing, like you click on a page and 90% of it is links to other sites and ads, with no actual content. Maybe Google can figure out a way to have users identify these sites for them. If they do that it won't penalize legitimate AdSense users, and web surfers will find more relavent results.
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Topher3105, 23 Jun 2006 @ 12:32pm

Lets say the truth here
I had a website for a year running with an affiliate program that paid me commision if someone clicked through my website and made a purchase or signed up for a service. A CPA methodology. I didn't earn one dime. There is no guarantee, proof, or legislation that states a retail website has to pay you commision based on clicks.

I think what is really happening here is that Google is tired of paying people for just clicking on or viewing an ad link, and instead, wants to pay less money by implementing the idea that fewer people actually click through and perform an action. Google wants to pay their affiliates less to implement a service that makes Google rich.

The problem with CPA is that it is based on cookies. When you click to a retail site, the ad stores a cookie on the clicker's system, when the clicker buys something from this website, technically the cookie links the sale back to the originating website that the advertising was on.

The problem with cookies is everybody thinks they are evil and tries and prevent them from being stored on their computer, or persisting for any length of time. In many cases, people simply turn off cookies, in others, cookies only last for the current session. In theory, even if the user leaves and returns back to the website, your supposed to earn your commission, but if the cookie is gone or never existed, forget about it.

The bottom line is, maybe for extremely high volume websites, CPA works and can earn them money. The problem is that Google banks that AdSense attracts millions of smaller low to moderate volume websites to proliferate their advertising, and they want to pay those millions of websites far less money then a CPC scheme. I am sure that once Google's "Trial" of CPA is over, they will realize that even if they pay more per action, they will save millions in payouts (or payoffs). CPA will become Google's ONLY methodology.

This is another notch that proves Google is greedy and evil, when will people wake up!
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- Jonathan, 23 Jun 2006 @ 4:24pm
  
  Re: Lets say the truth here
  The CPC has so much click fraud that the advertiser 7-10 times in the competitive market products get killed by competitors and foreign click fraud of which google will never, never admit to and keep billing. Would you?
  The sagga goes on.........
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