The future of cost-per-click is questionable.
Cost-per-click advertising, such as Google Adwords, is a staple of the internet advertising industry. It is also the primary form of advertising used to monetize parked domain names. But will CPC give way to CPA (cost per action)?
First, a little history. It used to be that many affiliate programs were actually CPC programs. You would sign up as an affiliate and the program would pay you a few cents for each click. But as one-off affiliate programs, it was hard to control click fraud. So companies focused on CPA. An “action” can be something as simple as a visitor signing up for a newsletter or as complicated as buying a product or completing a mortgage application.
But GoTo, the predecessor to what is now Yahoo Search Marketing, changed all of that. Its model took off, and Google adopted it (Google’s Adwords started out as a CPM model that charged advertisers each time an ad showed up).
But with click fraud rampant, are we going to see search engines move to a CPA model?
Google has been beta testing an affiliate network for some time, and this week re-branded an affiliate network it acquired with its purchase of DoubleClick (see graphic). It also announced it will shut down its existing beta test. The beta was integrated with Adwords; the DoubleClick program is not. This sends a mixed message.
I’m still unsure where the search marketing business is headed, but here are both sides of the story:
Why CPC will reign supreme – Publishers feel that being paid by the click is a happy medium of accountability. When advertisers pay per action, publishers now have to be concerned with the quality (conversion rate) of the advertiser’s landing page. Publishers also worry that advertisers won’t report all of the actions, thus ripping them off. Some people believe that we’ll even see some of the current CPA affiliate programs move back to CPC due to state laws. New York recently started charging sales tax to companies such as Amazon that have affiliates in New York. The state decided these people are similar to “sales agents”, thus giving Amazon nexus in the state (a prerequisite for collecting sales tax). These companies may start paying affiliates by the click to work around these laws.
Why CPA will overtake CPC on search engines – Click fraud is rampant. Advertisers are tired of paying for clicks that don’t convert. Why not pay only when the click converts into a sale? If click fraud continues to grow, advertisers may demand CPA from the big search engines. As for the argument that CPA puts too much responsibility in the hands of the advertiser, a network like Google can account for that. It will optimize the ads shown according to how much revenue it expects you to earn per click.
I see CPA taking a big bite out of PPC but I believe the two will find a equilibrium of sorts.
I don’t see PPC ever disappearing or CPA taking over totally.
Rob Sequin says
I would love to see the industry evolve into a CPA revenue stream.
1. Lots of crappy $.05 clicks don’t add up to a nice $49 CPA payment. PPC rev is about as low as you can go for CPM (revenue per thousand visitors).
Then there is CPA and then there are direct advertisers who pay the highest CPM.
Sign up with the Ebay Partner Network and you get $25 if someone signs up with ebay and buys something within 60 days.
Sign up with xsitepro and you get $49 if someone buys the software. Sure the conversion rate is low but that’s a lot of $.05 clicks (500 and 980 $.05 clicks respectively)
2. Will get people to develop unique content and therefore get a better return for their hard work. The downside is undeveloped domains will take a hit in the search engines and traffic quality. This might lower the value of generic domains IF it happens.
I think developed sites with unique content should be rewarded by the search engines AND revenue. Why should ANY undeveloped site make money just because someone types in a domain.
Don’t get me wrong, I’m not saying that’s a bad thing but if someone puts time into development, they should get paid more per click or per action than an undeveloped site.
3. Print media, radio and television are all way back in pay per impression. WOW, remember pay per impression on banner ads?
CPA standard revenue may get advertisers to realize how advanced the Internet is and how prehistoric print, radio and tv are.
Bring on CPA!
DR. DOMAIN says
Which brings me to this question…
Some douche has a site:
Like most internet schemes-he does’nt give details…but I’m guessing he corrals idoits into performing click fraud for him.Is this correct?
DR. DOMAIN says
@ Dr. Domain – no, the rich jerk is a program for arbitrage with affiliate programs.
DR. DOMAIN says
Somewhat…kinda’…or VERY legit?
Do CocaCola/Ford/Pepsi etc…pay ABC/FOX/CBS per action? no. do they pay per click? no
they pay per appearance. do they know for sure how many people are watching? no
they use estimates…
CPA is the best deal for the advertiser and the worst deal for the publisher!
If the visitor didn’t take action the advertiser is still happy to have another unique visitor who became familiar with his company, but you get nothing for sending him…
Adam Strong says
CPM is good for a lot of big brand advertisers want those eyeballs as Yaron points out. They care about beating the brand into your head rather than (fairly) instant conversions (cpa) or landings to their site (cpc)
@ Yaron – CPA can be very competitive, however. In a lot of cases you can earn a lot more from it than getting paid by click or impression.
@ Dr. Domain – if you want to get into the adwords-to-affiliate arbitrage game, the ebook you want to buy is GoogleCash. I bought the first version over 5 years ago and I’ve made $100k’s from the process.
Here’s an affiliate link to it: