One of the big pieces of news this week was Google announcing their CPA (Cost-Per-Action) product, or as they’re calling it – PPA (Pay-Per-Action). There are good analysis posts about the news from Techcrunch and Microsoft’s Don Dodge. It’s been expected for some time now that Google will move into CPA, as a lot of people in the industry view CPA as the holy grail of online advertising. But to step back a bit — what is CPA? As Ebrahim Ezzy wrote on Read/WriteWeb last August:
“In contrast to the CPC Model, which seeks to drive a high volume of traffic to the advertiser, the still-emerging CPA model provides action/acquisition opportunities by offering financial incentives – usually in the form of a revenue share percentage – to publishers. Incentives are solely based on actions such as acquiring qualified database entrants (e.g. opt-in email), driving sign-ups, downloads, inquiries or ultimately acquiring paying customers.”
Ebrahim also noted that CPA is optimal for advertisers, but it is a risky proposition for publishers. Therefore Google will be able to charge a lot more to advertisers for CPA. It’s also important to note that Google is far from the first to move into this space – affiliate advertising networks like Commission Junction and LinkShare have enjoyed good revenues from it, plus web companies like Snap and Turn. However Google’s presence validates CPA in a big way.
To my mind, the big question (apart from will CPA actually work?) is how will Google’s main competitors in online advertising respond? As Ebrahim wrote back in August, Google’s competitive advantage is its network size. So really the only companies capable of competing with Google in CPA are Microsoft and Yahoo.
Will Yahoo’s Panama have CPA? I haven’t found any confirmation of that, but John Slade (Senior Director of Yahoo Global Product Management) told Lee Odden in December that Yahoo wants to “define a standard business goal like Cost Per Action (CPA), then let the system automatically find the most cost-effective way to deliver against that goal”. Which sounds very vague…
What about Microsoft and their much vaunted new online advertising platform, AdCenter? Once again there is little information on this. I’d love to know Don Dodge’s view on it.
For now, Google looks to be the most advanced of the Big 3 in terms of CPA / PPA. So this means that Microsoft and Yahoo will have to scramble (again!) to catch up with Google in online advertising, or else they’ll need to do some acquiring. Perhaps all is not lost for the likes of Commission Junction just yet! What are your thoughts on this?
Originally published on ReadWriteWeb (archived copy)