Google PPA and the End of Affiliates

The industry is abuzz with Google's 3/20 announcement of the limited launch of its "Pay Per Action" ads and what impact it will have. They allow the advertiser to designate any action as the conversion event they are willing to pay for.

In theory, instead of paying for $20,000 for hundreds of thousands of clicks every month, an advertiser would only pay for the clicks that resulted in a sale. If you're thinking that means you'll be able to get the same sales and only spend $1,000 with Google next month, think again.

It's still going to be an auction marketplace, and the cost per action will be a function of what the major players feel a conversion is worth to them. So instead of paying 50 cents for a click, you may be paying $50 for a sale. Or $500. If your bid is too low, your ad simply won't appear.

PPA ads will only be available in Google's AdSense network, not in search engine results pages. Here are some of the most likely impacts:

• Affiliate marketing companies like Commission Junction are going to get hit hard, because this puts them in direct competition with Google.
• Publishers will have to choose to place these ads, which shift some financial risk away from advertisers to publishers. This means that advertiser demand will drive adoption.
• Google will continue its Borg-like advance towards eventual global advertising domination.

On the whole, this is good news for everyone who benefits from transparency in the advertising transaction. Traditional agencies and publishers focused on flat rate or CPM advertising will need to wrap their brains around this soon. Ignorant advertisers may mean bliss for now, but it won't last. If those advertisers figure it out without help from their agency or media companies, guess where they'll go with their advertising dollars?