Google's New CPA Experiment

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/03/22/cngoog22.xml

A lot of domain forum chatter about this today.

Bottom line: IMO click fraud has been managed to nearly zero by Google and Yahoo. This has happened on the publishers back.  It's no coincidence that you are making less money this year as these "announcements" come out.

Lastly and most importantly:  Domain name type-in traffic converts into sales at a higher rate than search-box, search engine traffic. Trademark traffic converts into sales better than generic intent traffic. This is good news for anyone who holds a domain name.  Bring on the new model!  Google @ $460.  I'm sure Google knows this is going to take their stock to 500+ or they would not do it .

Quote:  "Skin that smokewagon and see what happens" -- Wyatt Earp

Comments

[Edwin Hayward]

While I agree that there are benefits for typein domain owners in that the conversion rates may well be higher, there's also a new "danger" that will rear its ugly head: up until now, a lot of smaller businesses (all Google Adwords advertisers) may have had relatively little real idea how well their advertising efforts have been converting into bottom-line sales. Most are without a doubt piping all forms of advertising, SEO traffic (if any) etc. through the same front-page URL and are probably measuring their total sales (if that).

But with Google Analytics coupled with a simple CPA-based ad solution - assuming that Google's implementation is intuitive for busy business-owners to implement - they will at last realise how much, or how little, they're paying to get one new client, one incremental sale.

And the shocking discovery (to them - wouldn't surprise me in the slightest given the "poor" usability of so many business sites) may well be that their PPC advertising simply isn't cost-effective, now that they can actually measure it all the way through the sales process.

Through no fault of the traffic "source" (the traffic sent may be of tip top quality) and every fault of the business, their presentation of their product/service offering, or indeed that offering itself - yet the bottom-line result is the same: a retreat back to the comfortable "grey" world of untrackable ads, where you spend money and hope it comes back to you (classifieds, posters, outdoor ads, radio ads, TV ads, CPM/CPC ads etc.) since the alternative is so unpalateable (oh, nobody wants our product/our website is a heap of junk/etc) that nobody in management is willing to address it.

An analogy might be a lake stuffed to the brim with the finest trout (= a traffic source gushing quality traffic), yet a truly lousy fisherman will still fail to land a single fish (= customer)...

***FS*** Great comment.. And I think some domainers are dead-fish. But consider this quote: ""We're optimistic that it will be something that will be very compelling for advertisers," said Susan Wojcicki, vice president of product management at Google. Google needs money. Goggle is optimistic bacause they think this will be good for Google.

[Eric]

Hey Frank,

Nice posting. O.K. this is what I don’t get – I know everyone believes that Google would not do something unless they thought they would make tons of cash from it but this is my take.

1) This is a Brand Marketers gold mine – define successful action? My company implements ISO14001 solutions – a successful action is they come to my site and signs up for my monthly newsletter. Ohh the form is way too long and who wants a monthly newsletter? But hey they do know about my company and what we do and the traffic cost me nothing.

2) The second bit is passing info back on success of sale from online systems sounds easy - but how many of you have worked on these behemoths - it is not that is to do – time to retrofit systems – hmmm – Google get’s a perfect profile of our users and sales data – hmmmm.

3) New form of click fraud – hey go fill in a form – it is worth 2 bucks or go buy something and have the card declined. Now the business have to provide stats of bogus sales/signups etc – better hire more customer service personnel.

Maybe I am wrong and that is not new but this is the way I see it – they are testing but the jury is out if it is going to work. Affiliate networks work well when they are small but hundreds of thousands of suppliers – how does one choose which ones show up on your site?

Cheers,

Eric
P.S. I don’t understand the hint of a label of Domainers being sleazy – if I type in rumcakes.com – I want a Rum Cake – Point Finale!

[Jeff]

We already have big CPA titans such as CJ and Linkshare. Let Google continue being the CPC ruler. It works perfectly now. If advertisers want to pay only CPA they can go to a company that specializes in it.

[Faisal Premji]

Perhaps the CPA gambit is simply a way to get their mass advertiser base to implement conversion tracking, giving google valuable info on exactly how much the traffic is worth.

If it was abundantly clear *to google* exactly how much margin an advertiser enjoys, they can justify charging more

win-win for goog...essentially squeezing the last penny out of every advertiser, testing how much they are *really* willing to pay

increased visibility into conversions allows this 'squeeze' to happen - advertisers have to show their hand (eventual profits) and goog will squeeze them based on that, either CPA (advertiser driven) or CPC (data driven)

of course, advertisers still have to make money at the end of the day...but goog is targeting fat margins across the broad advertiser base to move the revenue needle.

[Ian Collier]

i think youre missing the point, CPA is a natural progression and one that domainers have zero influence upon. Maximising advertisers dollars means both the great G and their advertisers win. How that traffic arrives at its destination is of little concern to either party and will only increase exposure.. Is parking still alive anyway??

***FS*** Alive and well my friend. I LOVE CPA because it cuts throught the smoke and BS.. (Nearly) Everybody knows that domain name traffic is potent and high quality.. so my point is if the world wants CPA.. bring on CPA. "Domain name says to the Search Engine Search box: This is gonna hurt you alot more than me".

[Richard Ball]

Hi Frank. Reading the Google press release:
http://www.google.com/intl/en/press/annc/adwords_ppa.html
where it says:

"Pay-per-action ads are only shown on Google AdSense™ for content sites. AdSense publishers are able to choose whether they want to serve pay-per-action ads on their sites."

I'm wondering if this PPA program will ever be an option for "AdSense for Domains" sites. Plus, since publishers have control, I don't think this is an issue for domainers.

Looking at this from the point of view of PPC advertisers, I don't understand why Google doesn't create a "domain network" just like they have a "content network" for AdSense. If the "AdSense for Domains" program only applied to the "domain network" in AdWords, that would create a new level of transparency.

If traffic from parked domains really converts better than search traffic, then this would benefit domainers. Advertisers would opt into the "domain network" and would pay higher CPCs and increase budgets to target this traffic.

I suspect Google hasn't done so and continues to distribute "AdSense for Domains" traffic to both their search and content networks because they know a separate network would not be attractive to advertisers.

***FS*** Richard, I welcome CPA because it proves to the world what I know about domains. The traffic is "better" than search engine traffic. Google probably won't seperate out domain channel because a lot of it converts at 300% of their search box search. How do you apply 'smart pricing' when Google's own search box is the 100% benchmark? All of a sudden you have domain publishers that convert better than Google.. does Google pay them 300% of bid price? Google makes "a lot" of money from its domain channel.. Your hair would blow back if you knew how much. Domain traffic is like the crazy aunt in the basement spinning straw into gold. Everybody wants one, nobody wants to talk about it. Large scale domain traffic shines the light of truth on the flimsyness of search engine traffic. If your company traded publicly at 46X and your traffic converted worse than domains that trade at 15X you would do the exact same thing as Google.

[Steve Morsa]

Another thought I had on CPA/PPA is this:

If those instances when Google's being paid based on actual sales; and assuming you offer the common money-back, satifaction-guarantee; how do you get the commissions back that you paid them for the returns?

I also see a problem that because they're so "late" entering this space, that they're likely to run into real IP issues as the patent holding innovators and category leaders begin to assert their existing--and pending--software and biz-method patents in the years to come.

The existing affiliate players are not going to stand by and watch their businesses be crippled--or eliminated--without a fight.

ps. Frank--this is a wonderful resource (heard about you from Ron's DNJournal); thank you--and your experienced fellow domainers--for being willing to share your thoughts, ideas, knowledge, and experience with others.