Google announced earlier today that they would begin beta testing a radical change in services to their popular auction-style keyword-based advertising program. The new offerings will be tested among a limited group of advertisers with plans to expand the program in the next few weeks. The move comes just as Yahoo! announced similar plans to expand their advertising sales options to offer placement of ads on third-party Web sites.

The changes to the AdWords/AdSense programs are designed to give smaller, content based Web sites an opportunity to compete on a more even playing ground when it comes to landing CPM style advertising deals with large advertisers. Google currently syndicates its keyword based text advertisements to Web sites via its AdSense model, but the new offering would expand on that idea by allowing for the placement of more traditional ads.

The new feature of the AdWords program will be run as a CPM (cost-per-impression) model with advertisers placing bids on the available inventory. Advertisers will also have the ability to determine which Web sites their ads appear on. The new model will also allows for animated image ads, in addition to the text ads and static image ads that currently run on AdSense sites.

The move could prove to be a blessing to both advertisers and Web site owners. Advertisers have long lobbied for the right to decide which Web sites their ads appeared on, giving them more control over their ability to block ads that appear on sites driving click-thrus, but low conversion rates. A manufacturer of children's swing-sets could limit their advertising to parenting related Web sites rather than having their ad appear on any page that might feature words that trigger a contextual ad. Even more helpful, a high-end dealer of custom-built swing-sets could limit their ads to certain parenting sites after running tests to see which ones converted at the best rate.

The new interface will allow advertisers to enter a direct URL that they wish to have their ad appear on, or to search the database of partners by keyword and then select the site or sites that they wish to advertise on. The move opens up a vast realm of customization features that could lead to a dramatic increase in campaign ROI, if properly managed. Additionally, the ads will be purchased on a CPM auction model that allows advertisers to set the maximum amount that they are willing to pay for inventory. This allows the market to set the price of ad space by allowing advertisers to bid against each other, while still paying the lowest possible price for an ad. The ability to exclude certain sites from an advertising campaign could also be a big boon to the battle against ClickFraud.

At the same time, the move stands to benefit Web site owners that currently participate in Google's AdSense syndication program. Web site owners have been limited in their ability to profit from advertising because of the limitations of programs like Google's AdSense and the inability to directly contact and sell advertising to large businesses. The new program would make it more likely that a small publisher could pick up a piece of the advertising budget for a company like Nike or Coca-Cola. Given the chance to make a reasonable income from a content-based site, chances are high that more individuals would devote time and effort to the creation of such sites, increasing the amount and quality of information available online.

The shift to including CPM based advertisements could also provide an increase in revenue to Google's AdSense partners. Sites that receive high numbers of page views but low numbers of unique visitors can have a difficult time producing high click-thru rates, yet are often attractive to companies looking for branding opportunities rather than actual click-thru conversions. Since these site owners would receive a payment each time an ad was viewed, as opposed to each time it was clicked on, revenue levels could increase as more CPM ads appear alongside the traditional CPC ads.

The ads from the new beta program will be competing with the current CPC ads in the traditional AdSense program. Google will calculate an assumed CPM by multiplying the click-thru against the CPC cost to come up with a rate to match against the CPM bids.

Google is not revealing which companies are taking place in the testing stage of the program. They are, however, saying that they'll be collecting feedback and input from these testers so that they can make adjustments to the program before opening it up to the general public. While no official launch date has been given, Google has stated that they expect to expand the program within the next several weeks.

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