SAN FRANCISCO – Google is experimenting with a new proposition for advertisers: If you don’t get results, you don’t pay.
The company said Tuesday that it would expand testing of a system that allows advertisers to pay only when an ad spurs a consumer to take an action, whether purchasing a product, subscribing to a newsletter or signing up to receive a quote from a mortgage broker or car dealer.
The vast majority of advertisers now pay Google when users click on ads that are displayed alongside search results or on other Web sites, while some are billed on the basis of how many people view the ads.
“We’re optimistic that it will be something that will be very compelling for advertisers,” said Susan Wojcicki, the vice president of product management at Google. Wojcicki said the system would also give participating Web publishers a wider choice of ad types for their sites.
Under the “cost per action” system, advertisers decide what they are willing to pay for a specific action, like a purchase or a software download. Armed with that information, Web site publishers then choose whether to run a specific ad or group of ads on their sites.
Many advertisers find cost-per-action appealing, because it greatly reduces their risk, since they are not charged for ads that are ineffective.
The model has long been used online by “affiliate marketing” companies like ValueClick, which have created networks of hundreds or thousands of Web sites that display small ads for e-commerce sites. The publishers are paid when they refer a user who makes a purchase.
But many other companies are using cost-per-action ads in different ways. They include the search-engine start-up Snap, which displays cost-per-action ads next to search results, and Turn, a network that matches advertisers and publishers interested in cost-per-action ads.
“We think it is a model that all the large players in search will be embracing over time,” said Tom McGovern, the chief executive of Snap.
For the time being, Google is not putting cost-per-action ads next to search results, limiting them to publishers’ Web sites and essentially creating its own affiliate marketing network. Industry insiders said Google’s entry into the market was likely to accelerate its growth.
“This is a big market at an early stage,” said Ellen Siminoff, the chief executive of Efficient Frontier, a search marketing firm.
Cost-per-action ads have another advantage: They virtually eliminate the problem of click fraud, in which people or computers generate clicks on ads for the sole purpose of getting payment.
While the appeal of the cost-per-action model to advertisers is clear, some analysts say publishers may be more reluctant to embrace it, at least for now.
“For publishers, it increases the complexity of their business,” said Mark Mahaney, an analyst with Citigroup. Publishers have limited space for ads and need to maximize the revenue they generate.
A cost-per-click model is risky, because it provides no guarantees that a publisher will receive any payment for a given ad.
Mahaney said Google could make the system more effective and appealing if it figured out an automated way to project how much revenue each ad is likely to generate.
Advertising.com, a unit of AOL, uses such a system to determine the right placement for cost-per-action ads on publishers’ sites.
For now, the affiliate marketing business remains relatively small.
Fuente: International Herald Tribune