Google’s CPA Bidding System and Affiliate Marketing
I read today that Conversion Optimizer, Google’s new CPA bidding system, is ready for advertisers. Maybe it’s just me, but I think the next few months are going to be very exciting. There is a definite lack of real data concerning PPA and I’m definitely curious to see what both advertisers and publishers have to say about it.
One thing that caught my attention and has me a bit apprehensive is the qualifications for an advertiser – apparently, if you’ve received less than 300 conversions in 30 days, Google doesn’t want you.
How does Google really know if your traffic converts? Since everyone will have their own definition of what an “action” is (sale, subscription, even a click), it must be a logistical nightmare for Google to track that. Unless they can. Which is scary. And if they can’t, then it’s simply the advertisers providing the information to Google, in which case anyone who wants to qualify can simply lie about their conversions.
Or, maybe, Google does it this way:
300 conversions a month
x 5% conversion rate____
= 6000 clicks a month
6000 clicks a month
x 10% CTR________
= 60,000 impressions a month
Wow. So that means an advertiser has to rack up an impressive 60,000 impressions a month to qualify for the PPA program. If Google can’t track conversions (and if they can, then someone tell me how), then they must look at traffic.
Except, isn’t there a little problem with clickfraud? Ha! See, I told you that clickfraud would come to haunt PPA marketing.
This could mean that unethical publishers sending advertisers incentivized traffic are actually helping the advertisers and hurting themselves. How? Let’s say you’re an advertiser with 60,000 impressions composed of a 70/30 mix of valid and invalid traffic that Google can’t differentiate. Since 70% of 60k is less than 60k, it’s the clickfraud that is allowing you to qualify for the AdWords PPA program. And since PPA isn’t a victim of classic clickfraud, your new ad campaign should be protected. Of course, your traffic will drop (though one would imagine your conversions should stay the same). All in all, PPA might mean savings in the long-term for advertisers, and bankruptcy in the short-term for clickfrauders.
I’ve been trying to find data for the expected average CPA for Google’s PPA program. Very speculative. There’s data for the Affiliate networks who have already adopted PPA marketing – CommissionJunction (ValueClick), Linkshare – but they’re not sharing their numbers. I guess we’ll know more in a few months, when Google’s Conversion Optimizer starts producing results.
Speaking of ValueClick, I’ve read predictions that they’re hurting a bit, now that Conversion Optimizer is rolling in production. Think about it. If you were an advertiser and wanted to play in the world of PPA, who would you go for?
I don’t think these second-tier players need to worry too much. Just look at PPC providers like, say, SearchAnyway. We command a very high market-share in the second-tier world and receive several hundred million searches a month; similarly, small businesses and those that don’t qualify for Google’s program will surely appreciate alternative providers who might not compete in a Google-level but certainly won’t be drummed out of business. ValueClick and others just need to focus on the niche markets, the areas where they can provide higher rev-share and earn more for their publishers and advertisers.
Hey guys, if you need some pointers in this, feel free to drop me a line.
