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I just signed up for the beta trial of Google’s latest innovation, Pay-Per-Action Advertising.

PPC or Pay-Per-Click has been the reigning king of the online ad world in recent years since usurping the throne from the more invasive banner ad format.

Pay Per Action (or PPA if yer into the whole brevity thing) is about to change all that. With PPA, unlike PPC, there is very little wasted effort. An advertiser only pays the Google machine when a prospect actually takes action, which can be determined by the advertiser.

How much is a lead worth to you? Set that number as your PPA value and you pay EXACTLY that for all the prospects gained by your campaign. Want to advertise for sales conversions only? Set your PPA to only pay on conversions and you waste no money on visitors that don’t actually buy.

What does all this mean? Well I foresee a lot more revenue in Google’s future. You will see PPA ad budgets go through the roof because the value of campaigns is easily measured. If a campaign is working successfully, there would be no reason not to continue to increase the budget indefinitely. This is the key difference from PPC campaigns in which advertisers pay for site traffic whether the visitors convert or not.

A successful PPC campaign may generate hundreds of clicks but no conversions, not cost effective. PPA solves this problem.

I am curious how Google hopes to avoid a glut of bad ads being posted. If users don’t pay unless a conversion happens, these users could create any kind of ads they want with no ramifications.

I also wonder how google will rank these ads. If PPA value is the determining factor, we will be seeing a lot of adwords for Ferrari’s and not many for Moleskine notebooks. I am quite sure they have thought of this, can’t wait to see the solution.

Thanks, Robert, for the tip from the Future of Online Advertising conference in NYC.