Google recently announced that they have launched a Pay Per Action (PPA) beta. Most of Google's revenue comes from their Pay Per Click (PPC) model. Google therefore must have analyzed how the PPA model would affect their ad revenues.
Advertisers are not concerned about how much they pay per click, they do however care about how much they pay per action. An action can be defined as a lead, a sale, a pageview, etc. Most large advertisers already track the cost per action (CPA) and use optimization software or services to hit their CPA goals.
Google's PPA model will therefore affect a number of middlemen, including companies that specialize in lead generation. Google's PPA model will also impact Google's revenue in the short term. The PPA model serves to reduce inefficiencies in PPC model. However, over the long term Google is assuring advertisers that they can bid for only for revenue events that effect them and let Google manage the rest.
For now, this beta is only on Google's Content network (not on Google search). This will help advertisers concerned about click fraud on the content network.
Overall, the announcement is a positive step, one just wonders when Google will roll it out as a broader program and how it will affect Google's revenue.
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I agree that the CPA model is the most efficient model, aka the "holy grail" of advertising. However, practical concerns convince me that like the real [sic] holy grail, large scale CPA adoption will never see the day of light.
I find it incredible that a publisher (Google in this case) will be willing to take up the burden of risk on the advertiser's business, when the most important aspects of the advertiser's business remain out of the publisher's control (landing page optimization, etc.).
Additionally, the greatest appeal of CPA is that it eliminates click fraud. Here's a thought: what about tracking fraud? Obviously, Google is going to implement some sort of tracking on the advertiser's page to track conversions (which in and of itself is going to be a deal breaker for many). Wouldn't some enterprising advertiser try to tweak with the conversion code on some of his pages so that he can reduce some of those CPA checks to Google? Now multiply this by thousands of advertisers doing the same and it becomes a logistical nightmare for Google to track this kind of fraud. And remember, this time it is Google that is being fraud-ed.
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