Vinny Lingham's Blog - Latest Comments in Google Launches CPA Ads - Problems with the Model

Re: Google Launches CPA Ads - Problems with the Model

MM — Wed, 21 Mar 2007 03:28:18 -0000

You've still got the problem with the fact that it's adsense that this system will be running on. People who click adsense ads are more curious than ready to buy. If we're talking CPA, to make any real money, the low low number of people who actually click these ads would have to be buying something big. Most people who click an adsense ad to get off some worthless site don't just have their credit card laying around ready to enter the number to buy a product they didn't know they needed. I think Google makes more money just charging per click.

Let the arbitragers make the money. They're the ones buying majority of the clicks.

Re: Google Launches CPA Ads - Problems with the Model

Vinny Lingham — Mon, 26 Jun 2006 10:43:00 -0000

Not sure that I agree with you either!! :-)

If the clicks are high, and no conversions, then Google will most likely determine that the ad is not relevant - their ultimate measure of whether an ad is displayed or not.

High CTR & low yield will lead to a scenario where Google should derank the ad, due to non-interest shown by the user, especially in a CPA scenario where the user is not completing the specified event.

Google really doesn't care that much about money if the ads are not relevant, but when it's relevant - they will milk you for maximum CPC/CPA - make no mistake!

In my mind, Google will use a mixture of CTR & Conversion rate to determine whether or not an ad is relevent, so "false" clicks should affect yield and therefore ad rotation.

Re: Google Launches CPA Ads - Problems with the Model

Massimo — Mon, 26 Jun 2006 09:23:00 -0000

Hi Vinny,

I understand what you're saying, but I don't agree with you when you say...

>If Google mixes CPC & CPA inventory for the purposes of yield, then people will click the ads, to generate lower yields - creating a similar click fraud scenario to what we have now.

I think that for CPA ads the fact that people will make false clicks on them or not does not really count because in the end what Google will want to match is how many impressions they give a certain advertiser (no matter if he pays per click or per action) vs. how much money they make. So, on CPA ads you can't cheat by just clicking, you can only make click-to-action stats look funny :-)

Re: Google Launches CPA Ads - Problems with the Model

Vinny Lingham — Sun, 25 Jun 2006 23:58:00 -0000

Hey Massimo,

I certainly agree with you - but the credit card fraud is just one way of creating issues. If Google mixes CPC & CPA inventory for the purposes of yield, then people will click the ads, to generate lower yields - creating a similar click fraud scenario to what we have now. I'm sure that CPA is the way to go, and I'm even more sure that the road will not be easy!

V

Re: Google Launches CPA Ads - Problems with the Model

Massimo — Sun, 25 Jun 2006 16:34:00 -0000

Hi Vinny,

I'm not sure, it still seems safer to me than the current ppc model. Only true criminals steal credit cards, whereas I suspect ppc fraud is a lot easier to do, for example - not to mention that even competing ecommerce sites sometimes try to bust other sites' budgets on adwords and adsense...

Re: Google Launches CPA Ads - Problems with the Model

Jean-Marie Le Ray — Fri, 23 Jun 2006 00:27:00 -0000

Hi Vinny,

Your Future of Search Engines' post was definitively prophetic and I'm happy to have it translated a few days ago!
Now I speak about this kind of CPA revolution here. Cheers,
Jean-Marie

Re: Google Launches CPA Ads - Problems with the Model

Vinny Lingham — Thu, 22 Jun 2006 20:14:00 -0000

It's not quite that simple. Given that at the point in time when the auction for the position is run, the advertiser who has the highest effect earning per click, given estimated CPA, may not even pay for new customers down the line, if the reversals are too high. We've seen reversals of up to 32% on some merchant programs (where some months they only average 15%), this fluctuation is quite unsettling in any calculations that Google may have to run at runtime.

Re: Google Launches CPA Ads - Problems with the Model

Jamie — Thu, 22 Jun 2006 19:56:00 -0000

Seems like all they would have to do is align their payments with the merchants' return policies and their risk is minimized?