Last month Google announced plans to launch a beta test of a new pay-per-action pricing model for Google AdWords advertisers. The new model runs much like an affiliate program, costing advertisers only when someone completes a desired action on their web site. For companies that know their customer acquisition cost, it could be a good opportunity for them to take advantage of Google's broad viewer base.
The system works through Google's content network and allows publishers to select the ads that they wish to run on their site. Advertisers can run text ads, image ads or new text link ads that appear inline with a web site's content. (Meaning that the ad shows up as a link just like an editorial link would, though it's noted as a Google Ad when a user mouses over the link.)
While many bloggers are focusing on the publisher side of the program, I thought it might be a good idea to dive into the act of setting up a campaign. It's pretty straight forward if you've ever used the Google AdWords system, but here's a step-by-step walk-through of the process.
Once you're logged into your Google Adwords account, you'll notice a new tab called "pay-per-action." It sits next to the standard and cross-channel tabs on your campaign page. Simply click on thetab to enter the pay-per-action campaign area.
Once you're on the pay-per-action campaign page (as shown above), you'll want to select the "create new campaign" option.
At this point, you'll need to enter some information about your web site. You can see the fields in the image above asking for your product name, a description and a logo. This will help Google provide publishers with information to help them decide if they'd like to run your ad on their web site.
Next, google will have you enter a list of keywords or keyword phrases that relate to your product or offering. These terms will trigger your ads when the publishers are searching for new pay-per-action ads to feature on their site.
Once you've given Google enough information about your product to index it for potential publishing partners, you'll move on to creating the ads that you plan to run. This part of the process works pretty much the exact same way that standard Google Adwords ad creation works.
After you set up your ads, you'll need to define the action that you consider to be a conversion. That might be a sale, a newsletter sign up, a sales lead via a web form, or any other action that you feel is worth paying for.
You'll give this action a name and then define how much you are willing to pay for it. This is the amount that you'll be charged when someone converts via the campaign.
Finally, you'll snag the conversion tracking code that is created by Google Adwords and paste it on your landing page. This allows Google to match up the conversions with the campaign so that publisher partners are properly compensated. It also helps you track the conversion rates of your campaigns.
While the set up is pretty simple and runs pretty much in line with traditional AdWords campaign set ups, there is a potentially fatal flaw in the system.
Google doesn't seem to have built anything into the system to account for charge backs, product returns and so on. Many traditional affiliate programs hold a percentage of affiliate commissions in reserve to cover charge backs, returns and other issues. Google's new pay-per-action model doesn't have this feature. That means that while Google will get paid by the advertiser when someone makes a purchase, Google isn't going to refund the money if the person that makes that purchase decides to return the product.
In other words, it opens up a whole new potential for click fraud. Imagine legions of paid surfers visiting sites and going through the motions to sign up for a newsletter or make a purchase only to then cancel out once Google and the publisher have been paid.
That means that setting up your campaign isn't as simple as knowing what you can afford to pay for each conversion. Instead, advertisers will need to factor in their return rate and their charge back rate and will need to calculate new figures for this specific campaign.
It looks like testing will be the name of the game for those in the beta program. Testing to see how well the system works. Testing to see if charge backs and returns become a serious issue. And, testing to see if any publishers will actually be interested in using up their ad space for the program.
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Jennifer Laycock is the Editor of Search Engine Guide, the Social Media Faculty Chair for MarketMotive and offers small business social media strategy & consulting. Jennifer enjoys the challenge of finding unique and creative ways to connect with consumers without spending a fortune in marketing dollars. Though she now prefers to work with small businesses, Jennifer’s clients have included companies like Verizon, American Greetings and Highlights for Children.
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