Lots and lots of talk about Google’s entry into the CPA realm with their Pay per action beta test, it’s big news for affiliates, advertising agencies, merchants but especially, affiliate networks like CJ, Linkshare and Shareasale.
Pay-per-action advertising is a new pricing model that allows you to pay only for completed actions that you define, such as a lead, a sale, or a pageview, after a user has clicked on your ad on a publisher’s site. You’ll define an action, set up conversion tracking, and create ads that publishers in the Google content network can then choose to place in new ad units on their site. Source: Pay-per-action beta test
Lots of coverage by many well respected people:
Andy Beal of Marketing Pilgrim says,
To me, it sounds like a clear threat to the likes of Commission Junction or LinkShare – or any other affiliate marketing network. Google, for all intents and purposes, has just entered the affiliate marketing arena, with the battle cry that they can do affiliate marketing better than the affiliate networks can.
Now, I feel obliged to inform you that when I posed this suggestion to Rob Kniaz, product manager for Google’s advertising products, he was very quick to deny any intention to compete in the affiliate network space. “We think this is different from the traditional affiliate marketing industry”, said Kniaz. “[It’s an] extension of the current AdWords product”. Oh really? Kind of like how Google doesn’t see itself competing with Microsoft’s office suite. Source: Google Launches Pay-Per-Action; a Threat to Affiliate Networks?
Michael Arrington of Techcrunch says,
Affiliate marketing networks like Commission Junction and LinkShare are screwed. These networks also operate on a cost-per-action basis, mostly with online retailers. Even though some of them have scale, they will not have the ability to compete with Google on sheer size of network. Advertisers flock to volume, which drives average pricing up. When prices increase, publishers flock to the new platform because they’ll earn more. Look for serious publisher leakage from the big affiliate networks over time as this new product scales up. If you want to argue this point, note what happened to the stock price of Commission Junction’s parent company, ValueClick, today. And that’s even though the market has largely adjusted for this news already – this move to add PPA ads has been rumored for some time. Source: Digesting Google’s New PPA Advertising Product
I don’t think Michael could be more wrong on this point, while advertisers do want the numbers, and Google certainly has the numbers, they also need more support than adsense publishers or adwords cpc campaigns do. Lots of merchants operate with the seasons, so there will be lots of ads being created and used by them, through in coupons and you have some more complexity, the affiliate networks like CJ, et al, are already setup and cranking out the creatives and coupons, and offer much more support than Google ever will. There won’t be serious publisher leakage, but many of the same affiliates will sign up for the Google network, as all affiliates look for the highest paying offers, but you won’t see a mass exodus of affiliates. You probably won’t see a mass exodus of merchants either, although the most movement will be from the smaller merchants, and those merchants who can adapt quickly.
Scott Jangro agrees with me, or I agree with him, however you want to look at it, and probably puts it better than I do when he says,
Affiliate marketing involves traditional advertising methods like banner ads and text link ads but most of the really successful affiliates are not merely ad-pushing publishers. While there are plenty of affiliates who use affiliate marketing to show ads, the majority of top affiliate marketers form close partnerships and integrate with the merchants they promote. They use tools like promotions, coupons, and product data that get tightly integrated into the affiliate’s offering. They communicate with the merchants on IM, email and even the telephone. An example is a niche price comparison shopping engine. A single page on that site may have 20 different products from 15 different merchants, each with a “buy” link going through an affiliate network.
Will this cut into some of the publishers that currently operate in affiliate networks? Definitely, but one could argue that Adsense already did that damage. There’s a 95-5 rule that’s talked about in Affiliate Marketing. 95% of the revenues are driven by 5% of the affiliates. This 5% of affiliates cannot be serviced by an “advertising” model. Source: Will Google CPA Eat CJ and Linkshare Alive?
And Scott should know, he worked for Befree for years and is now a successful affiliate himself. Another super affiliate, Vinny Langham aggrees,
I’m not going to rehash my previous post on this topic (still highly applicable – I highly recommend reading it before continuing with this post), but Google has finally launched Pay Per Action across their Adwords Network for US advertisers onto Adsense (not Search Network yet). I still believe that there are severe problems with the model, and Google will discover that it is not sustainable. Source: Google Launches Pay Per Action (CPA)
We shall see what happens when it is finally released, but me, I’m predicting another Froogle, which was never really any competition for anyone.
Added: Wayne Porter, as always, weighs in with his own thoughts, where he talks about the Attention engine and how attention = revenue.
Some of these services are fossil fuels that will burn out and be replaced, some are windmills, solar collectors, fusion engines…it is all about sustainable fuel for the Attention Engine. The engine’s byproducts are not waste either- the byproduct is revenue. Revenue generated by selling what advertiser’s have never really had- not only a highly efficient targeting system that ensures the right placement no matter the medium, but what is coming down the pipe, what decision is a good one or a bad one. The Attention Engine will know. Source: Attention- What Google CPA Really Means…
If Google has anything, it is loads of user data, search habits, browsing habits, purchasing habits, you name it, they can tie it back to people, even if they have changed their privacy habits recently, I guarantee you they still have the means to tie it back to each and every user. I agree with some of the thoughts of others, whatever they do, it will feed them more data, and help them pull in more money and users, for now.