CPA Does Not Pay The Bills
So Google is introducing Cost-Per-Acquisition (or Action) advertising model and everybody is looking and talking and has an opinion. So do I 
This might be good for Google since it will reduce, if not eliminate, click-fraud. It’s also good for advertisers who will only pay when a sale occurs, just like any standard affiliation scheme. Welcome back to 1999!
But this move is not good for everybody and certainly not for website publishers.
In 2001, when the advertising online industry made the move from cpm (cost per impression) to cpc (cost per click), publishers saw their advertising revenue dramatically drop. With a cpa model, they now have to use space on their site for an ad which will only pay out when someone clicks on the ad (we’re talking less than 1% of visitors here), then falls in love straight away with the product they are being presented with and then jump on their wallet to get their credit card out. This is like a 5 clicks experience before the site owner sees any return.
When was the last time you clicked on an ad and made an impulsive buy? Unless Google tracks the users sent to the cpa advertisers and credits the site owner for future sales when/if the user goes back to that site and purchase the product (maybe with a time limit of 30 days), the revenue for publishers will drop when switching from cpc to cpa.
This, I’m afraid, is bad news for the small to medium size websites. Only sites with an enormous unsold inventory will benefit from it but still, the monetisation per page is ridiculously low.
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Matt, CPA is nothing new, as you mention with the web affiliate networks like Commission Junction, LinkShare, Shareasale, etc. With the AdWords CPC model vendors would expect to pay $.65 - $1.50 for a good keyword. They would then expect to get a 3 - 3.5% conversion rate (averages). So as a vendor, if you pay $1 per click and close 3%, you’re paying $33 per sale. The website gets a share of this revenue, with Google keeping some. If the CPA earns $33 per sale, then it is a wash (assuming identical rev. share from Google on this model). This must be determined by looking at the average sale value and the percentage revenue share. If you operate a legit site that provides good content and encourages people to buy something of value (like people do with Amazon affiliate links) then you can do quite well (not as well as they can do with ZiXXo, but quite well ;))
Comment by Mike Hogan — 7/2/2006 @ 5:11 am