“With cost-per-click ads, spammers create bogus pages where confused consumers click on ads in an effort to escape.

But with CPA ads, clicking is not enough. The game is now to manipulate consumers not only to click, but to take some further action. And I don’t use the word ‘manipulate’ arbitrarily.

This is about turning the web into one big pile of junk mail, aimed at getting you to sign up, buy, or commit to something that you hadn’t necessarily wanted.”

Scott Karp
Publishing 2.0

Learn more about Google’s move into Cost Per Action advertising by tuning into Weekly Insight.  This week’s show can be streamed or downloaded below.

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By now you’ve likely heard of Google’s Pay-Per-Action Beta announcement wherein advertising is sold on “a new pricing model that allows you (the advertiser) to pay only for completed actions that you define, such as a lead, a sale, or a pageview, after a user has clicked on your ad on a publisher’s site.”

What you’ve likely not heard are brilliant observations from respected industry experts.  I’ve collected them for your consideration.

Peter Caputa IV
(via TechCrunch)

“... what if Google manages the risk for the publisher? It wouldn’t take much for them to compare an eCPM from different CPA, CPC and CPM offers and choose the right ad to run to maximize conversions and profit for them and the publisher.

The real reason that CJ, LinkShare, Amazon’s programs haven’t scaled is because they don’t have liquid markets:

1) Most small businesses can’s participate because of specialized knowledge, resources and investment required.
2) Most publishers can’t manage the risk, especially if they can sell high value ads f2f or phone2phone on a CPM basis.

Google COULD bring liquidity into the market by lowering the barrier to entry for advertisers to participate in CPA/PPA advertising and for publishers by choosing the ad that pays them the most, whether it’s CPA, CPM or CPC. We’ll see.”

Alan Rimm-Kaufman
(via TechCrunch)

“... the beta is only for content sites—eg the adsense network. That’s an important issue—that’s where all the fraud is. Another angle not discussed here in any depth yet is trust—some retailers reluctant to share conversion data w/ G.”

Aaron Mentele
(via TechCrunch)

“The text ad links will be something the advertiser chooses whether or not to support. Most of our clients wouldn’t support them for a few simple reasons. The first and most important is that they’re accountable for all messages marketing their products. If a publisher writes 0.0% APR, or guaranteed weight loss, it’s the advertiser that gets stung. Google doesn’t have a good way to allow advertisers to keep track of all the instances and the context surrounding them (’apply now’ text ad links.) Most of the big advertisers just won’t allow it.”

Pat McCarthy

Will this hurt lead generation or affiliate arbitrage?

I’m not sure I care. Businesses need to provide value, and if Google just made it more efficient so that it’s harder to arbitrage stuff, so be it. I’m not necessarily against arbitrage, but you can’t expect companies to leave things inefficient. Arbitrageurs are always looking for an edge, and most likely they’ll still find one somehow and somewhere.”

Sam Harrelson
In reaction to a statement I made questioning the strength of the Google Economy relative to the quality of visitors they’ll be able to deliver, Sam asks us to consider Google’s move as one that recognizes the predicted Attention Economy and throw away our old school thinking!

“‘Quality’ is as dead as (Web) links.
It’s not about quality (or quantity) anymore. This revolution happened in other industries and in the Academy almost 20 years ago and we’re just now getting it in the marketing world.

Advertisers are paying for attention, not quality leads or quality actions. That attention can be evaluated based on a certain number of metrics but our antiquated notions of ‘quantity’ are not one of those canons, or yardsticks, that will be used to measure.”

Put that in your pipe and smoke it for a moment.

Myself, I think it’s important to first note that, so far, Google is restricting the CPA option to its syndication network… indeed.  This has many implications as does the company’s suggesting it will enter into a familiar realm… text link ads.  Overall Google is taking aim at the fastest growing part of the Web: what most are calling social media.  The question is, will they open up a new realm to be gamed by their affiliates?  It seems highly likely based on history that the manipulating of consumers to take actions that they don’t really want to take is imminent.

On a brighter note, the opportunity exists for Google to

A) lower the (cost and complexity) bar for entry on CPA advertising while offering up their most valued (by advertiser) asset—scale

B) manage risk for publishers by calculating an eCPM and serving up the most profitable ad based on its secret sauce relevance algorithm

This entire move plays beautifully on advertisers’ love affair with scale AND relative disdain for actually doing the work—targeting and optimization that serves their better financial and customer-based interests. 

Bryan Eisenberg provides excellent perspective (from a higher level) at Conversionrater.com when he says…

“... most sites still struggle with converting visitors. Once you get good enough at converting visitors it is almost always more effective to buy CPM based on a lower price to your normalized cost per action. CPM are much easier to negotiate and like you said less risk to the publisher. There are not many publisher that are fond of risk.”

“Brands still matter on the Internet.  Most of your profits come from buying your own brand name.”

It is a “profound mistake by all of us to think we’ve figured out how to measure ROI on search.  We’re in stage one.”

Jeffrey Glueck
Chief Marketing Officer
Travelocity.com

“Yahoo seized back paid search market share during February 2007 across our client base…

In January 2006, our agency was spending about 38 cents on Yahoo for every dollar spent on Google running paid search for our clients.  This percentage fell steadily during 2006, reflecting Yahoo’s loss of share to Google. Relative to Google, our agency increased our Yahoo spend during December ‘07 and January ‘07. We surmised that this uptick had to do with how Yahoo prioritized ad serving during the DTC-XML—Panama transition. 

In February, Yahoo aggressively took back share from Google, returning to Jan 2006 levels.  We believe this change was driven by the rollout of Quality Based Bidding on February 5.”

“I think the question: ‘What are you going to DO for me?’ is not so unreasonable (to ask outsourced search optmization practitioners). 

For many years retailers were told: ‘We can’t show you, because it’s like a treasure map, once you’ve seen it, you won’t pay.’ That’s fine, the problem is the treasure map you bought five years ago looks an awful lot like the ones for sale now.

The best practices in SEO web page design are well known, so why not simply have your web designers follow these well established principles?  If the issue is execution, does it really cost the rates Sara quoted — $25K per month is $300K per year — to do the work??? Seems like a big chunk of change to me.”

George Michie

When it comes to success on the Web, there’s nothing like simplicity.  Yet the list of successful companies (let’s start with Google’s front page triumph over Yahoo!) that have leveraged this into serious cash is a short one.  Today, I’m officially adding Turn.com to my list of companies to watch and I’m not alone.  Why? 

1) Scale: they’re focused on it.

2) Blends: their model leverages multiple existing/proven ad models (behavioral targeting, user profiling, etc.)

3) Choice: offering it to advertisers (cost-per-action, cost-per-click, impressions, etc.)

4) Automation: They’re “taking the decisions for placement off the advertiser’s task list” (source: Direct Magazine)

Oops… there’s that word again (scale), Valueclick (VCLK), Doubleclick and to a large degree even Google (GOOG) and Yahoo (YHOO) should sit up and listen.  Not to mention, choice.

According to my new hero CEO, Jim Barnett,

“These debates and discussions about contextual advertising versus categories, or demographics versus behavioral targeting—they’re really nonsensical.  The answer is that they all make sense. But they have to be blended together.

Successful ad networks of the future are going to apply very high-end technology to synthesize these targeted approaches, weight them for every single ad call, and then select the right ad for that particular user on that page at that time of day in that geography.”

But what are other analysts suggesting, asking?  Says Sam Harrelson of CostPerNews.com (in November ‘06),

“Continued automation of the space at the higher levels doesn’t bode well for the plethora of CPA networks paying for booths and parties at this year’s ad:tech NYC right now.  How will this affect CJ or Linkshare or Azoogle or AdDrive or VendareNetBlue in the near or long term future?”