Google PPA - Bad news for publishers
So maybe it’s not the most recent news development, but I've heard some recent buzz on Google's beta Pay Per Action program from some of the testers. They like it. I don’t like it. Here’s why:
The conversions on PPA will be, I suspect, initially much higher than PPC (first-tier affiliate programs, like AdSense, claim an average conversion of anywhere from 8-10%.). Why? Good question. By definition, this is a service where advertisers are paying ONLY for conversions, i.e. actions. Therefore, the bids on PPA advertising models will have to be much higher than PPC, and while this relationship will see profits made, it's only temporary and somewhat misleading.
Why? Again, I'm glad you asked. Say PPC advertising in Google gets 10 sales out of 100 clicks - in other words, advertisers get 10% conversion with Google. With a PPA model, publishers won't be paid for the 100 clicks, but only for the 10. Therefore, for publishers, the bids should be 10 x as high as they are now.
Will they be? Will advertisers paying 15$ for a click now with PPC simply switch it up and pay 150$ in PPA? Probably not, despite the initial conversion data. So most publishers won't go for this model (if Google gives them a choice, which they surely will, or allows them to have both PPC and PPA, which they surely won't) and the ones that do will probably try and cheat it, leading to lower conversions and tons of clickfraud.
You think clickfraud is bad now with a $5.00 bid? Ha.
Clickfraud is estimated anywhere from 15%-40% (my own personal estimates are quite higher). Imagine the clickfraud on an ad valued at $150! Conversion rates and bid fluctuations over two competingadvertising models (PPA or PPC) leaves the door is wide open for fraud.
In PPC, a click is a click (unless it's invalid, and trust me, its the advertisers who get the last word on whats invalid, not Google). In PPA, who gets the last word on what an "action" is? I believe, though I'm not sure, that users can define what an "action" is - who's to say they won't define a click as an action, thus making all the PR Google is telling their advertisers about the benefits of PPA fluff?
And what if the advertisers get to decide what an "action" is, thus deciding which clicks they'll pay for? Alarm bells should be ringing for publishers everywhere. Higher bids do NOT mean less clickfraud. In fact, I see more opportunities for fraud (both by publishers and advertisers) with PPA.
I think the PPC model works best - it's transparent, earns solid results and revenues, and is in fact easier to monitor against fraud. It also compliements what advertising is supposed to be - a message from the firm to the consumer.
Advertising is not just about earning a sale for each time someone sees your ad. Advertising creates brand recognition, exposure, and more often than not leads to indirect sales. Paying for every click that brings an internet user to their website costs advertisers more, but it's part of the WHOLE buying process. PPA is like saying to the TV company, "Ok we're not going to pay you for airing our commericial, instead we'll just pay you everytime somebody buys our product and mentions your TV station".
