Googles Goes CPA

Cost per acquisition from Google (GOOG)? Wow.

Let’s do the math here. “We have the technology, we can re-build…”. You middle agers will get my 70’s reference here.

Seriously though. This is completely logical. How many of us have already seen similar ads at Yahoo. A banner that expands on mouseover that includes a response form in the banner. The traditional goal in advertising is to bring people to your site so that you can make your pitch in your own way and build your brand in a way that you have control. With a CPA (cost per acquisition) advertisement, “I don’t care” if they hit my site, I don’t care…if they get my brand, I don’t care… about anything other than the customer acquisition that took place. Once that submission has taken place I will then have the opportunity to get my message across, do some branding, etc. The form is all about a conversion to be able to reach the customer.

I read the news at Businessweek and I found it a bit funny that the article mentions Yahoo and the progress that they are making with Panama. The writer doesn’t even touch on the fact that YHOO has been doing these CPA ads on their site for some time. Google is getting credit for…, here is the headline “Google’s Out to Remake the Ad World Again” and Yahoo is getting credit for… “But Yahoo’s new Panama is a major step forward”. They missed the fact that Yahoo has already been out there.

Why would they miss the fact that Yahoo is doing something similar. Is Yahoo billing these on a CPM basis? If so, that is a major undersell. If you have ever been a buyer of leads, you know that the cost gets a little sick. And by “a little sick” I mean very high.

Is this an effort to help stem click fraud? Good luck. Pay a content distributor based on a CPA and you can be assured that they will do their best to get those forms filled out. There is a fine line between someone saying “not interested anymore” and hanging up, and the guy who says “I never filled anything out”. One is a bogus lead, the other is… well, maybe a bogus lead. If I am paying the high CPA, I call them both bogus. The reality is that the aggregator, in this case Google, will have to make that determination. If there are 3 people competing in a space, all running CPA campaigns, don’t think that a content site won’t self enter some data in every offer. If you have been involved in the operations of a lead aggregator, with an affiliate program, you will know what I mean. Self entry is a common method a smaller affiliate will use in an effort to game the system. They will collect the data on their own forms and then self enter on as many affiliate sites as they can.

There are issues for both Google and the advertisers. Let’s assume that this is an insurance quote provider. Let’s pick AAA insurance. If AAA is paying a CPA price of $15-$25 and John Doe submits a request, do they still pay? Lead aggregators have a credit system in place so that the buyers of the leads can request credits for bogus submissions. At some point there is probably manual intervention needed. With something that could take on such scale, there are bound to be service issues. Perhaps they can put a system in place to automate the process. Companies like Google don’t do these things without thinking these issues through and addressing them. They can’t take the little guy mentality of “we’ll address it if it becomes an issue”.

I get back to the fact that YHOO has been doing this for some time. Does that mean they aren’t have success with it? Are they on a CPM (as they were in the past)? If so, this move should at least give them some pricing power and the ability to make moves where they might have been afraid to go there in the past. Often times the biggest player in the space will make a game changing move and customers (advertisers in this case) are forced to follow.

Maybe that headline is justified.

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