Affiliate Companies Have Nothing To Worry About With Google PPA/CPA

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So Google wants to get into the Paid per action game? I think this is a really good thing…. not really for Google but more for the PPA/CPA/Affiliate industry as a whole. Anytime Google looks into doing something the press eat it up and want to find out why. For instance this week I was interviewed a few times about Googles PPA model and asked if I thought it was going to put existing CPA/Affiliate networks out of business. I think not and here are 6 reasons why.

1) CPA Fraud.

Google is not currently allowing revenue sharing, only a flat CPA for every transaction. There is a big pitfall in this model. Thinking back a few years ago, during the “coupon” days, many merchants were creating programs where publishers would get paid $20-$30 CPA for any purchase on their sites. What resulted was publishers taking advantage of this program, telling their consumers to purchase a tube of toothpaste at the retailer, which only cost $0.89, and the purblisher would get the $30 CPA. Granted, not all publishers took advantage of this, but advertisers had a lot of management to do, to ensure that specific publishers were not doing this. Working with a CPA Network, the advertiser simply passes few several publisher IDs to the CPA network, and the CPA network would communicate directly to those publishers, making sure they no longer promote offers this way.

2) Chargebacks.

Current model with CPA networks is as such: The advertiser defines an action that they want paid for, and at the end of the month is able to charge back transactions that canceled immediately or refunded their purchases. The CPA network usually builds this into their model and absorbs the cost of the chargeback, without charging back affiliates. With google’s model, they will automatically charge advertisers if an action occurs. As many of us already know, its very difficult to get a refund from Google, and chargebacks are generally very frowned upon in the industry. Will google deduct commissions made from publishers when tranasctions that advertisers generated get refunded? CJ has added an average “chargeback percentage” for each merchant, so that affiliates can pick and choose different advertisers to work with, whom they believe to be trusted.

3) Google does not allow revenue-sharing. Certain products at various merchants have differnet prices, different product margins, different cost structures, etc. For example, Amazon pays different commissions for purchases made within their electronics stores, book stores, tools, etc. With a flat-fee structure for a “sale,” merchants that wish to pay different structures for various product groups will not be able to participe.

4) Customization: The CPA networks (successful ones, like AzoogleAds), don’t simply run “advertiser offers.” Azoogle spends a lot of time helping advertisers come up with compelling creatives, redesigning their landing pages, advising them on the LTV (life time value of their consumers), as well as many other aspects of direct marketing. Will Google hire armies of direct marketeers who will work with each individual advertiser to make their offers “better?”

5) Lead generation fraud:

Google has hundreds of thousands of publishers. If an advertiser creates a program where they pay a small CPA for a consumer to fill out a simple “lead” form that does not require any kind of purchase, each one of those hundreds of thousands of customers can simply fill out one lead per day each. This is going to turn into millions of dollars of wasted advertiser revenue.

6) Affiliate-approval: If you read any discussion forum, you will find out how difficult it is to get into CPA networks like Azoogle for example. They call every single publisher that they let in, find out how they generate traffic, where that traffic comes from, whom they are currently working with, etc. The most widely heard comment from publishers that get denied is, “I dont’ get it, Adsense let me in!?” If the publisher isn’t good for Azoogle, why is it good for Adsense? Companies like Azoogle don’t like to pass up revenue for no reason. The reality is, not every publisher that works within adsense will work within the CPA space. It’s just not that simple.

Unless google has thoroughly thought this through, they will have MANY problems to deal with, and as far as I remember, I havent seen them acquire the expertise of a CPA or Performance-based network like Commission Junction (Valueclick), Azoogle, Pepperjam, etc.

I don’t see the Google CPA model becoming successful for quite a while, if at all.

86 thoughts on “Affiliate Companies Have Nothing To Worry About With Google PPA/CPA

  1. ToddW

    Is Google going after a bunch of people that want to run CPA ads on their site similar to their PPC or, could they possibly be taking the CJ approach where the advertiser has to approve (if chosen to) each publisher/website before allowed to place ads for that site? I take it this is NOT the case at all but could be an interesting one.

  2. Craig Alinder

    Great points! I think all the doomsday predictions can be ignored. Google will have to come up with something better if they really intend to get into the affiliate industry. I think they do want in, so we will see what they come up with next.

  3. Ali

    The worst that could happen is the internet advertising base just gets more spammed with irrelevant blogs and sites promoting CPA programs you couldn’t care less for.

    Oh and wait till MSN and Yahoo also announce similar ventures, then it gets even better.

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  5. noseoguru

    Good article but I think since Google is new in the CPA game, it will take some time for them to figure out what works and what doesn’t. I think that eventually, they will dominate the market but nobody will go out of business; there is plenty of room for more than one players.

  6. TheGrin

    I think that the biggest reason to try this market for google is to avoid click fraud.
    and i’m pretty sure that they will fail in doing this

  7. Ashwin

    Yeah, Google will have a tough time against click fraud. I kno of numerous cases where people have earned a ton of money on fraudulent clicks. But give it time…..

  8. jim

    I think they’re just testing the waters now and this is limited offer set is just them trying to figure things out. Aff companies should only be worried if they start buying up companies or openly stealing talent…

  9. CPA Affiliates

    I agree for every PPC frauder out their, there is probably 10 more CPA fruaders cause their is more money involved and they jump in on new networks sending trash traffic or false leads etc.. which in turn is why several new CPA networks fall quickly if they don’t actively try to detect fraud.

  10. ToddW

    I think it was on your show that google said they new how to prevent click fraud/invalid clicks from the site owners clicking their own links but they just havenn’t implemented it yet. WTF, AdSense has been around ~5 years and they still haven’t prevented/allowed site owners clicking their own links. My only thought on this is google allows it to make them money but if it gets out of hand they just ban the publisher, what other reason is there for not implementnig this!!!!

    Google has an awesome search engine they know what they are doing they have a hidden (ok not so hidden $$) agenda as to why they are not putting more effort in tracking clicks/fraud.

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  12. MM

    Everyone knows that the content network does’t convert well. Even if Google does get it right, it may work for a few offers, but not most.

  13. JonKelly

    Great to see some rational commentary on this, thanks ShoeMoney. It seems that Google thinks that going CPA will allow them to manage quality more easily, but as you said, the truth is that managing click (or lead) quality means having human interaction with your publishers and not accepting everyone who wants in.

  14. Louis

    While you make great points – about the state of google’s PPA program. All 6 points you make – can easily be done/setup/created by google in a short period of time.

    #1 – the flat CPA is prob just what they are starting out with – how difficult do you think it will be for them to turn on revenue-sharing” they already collect the necessary info for this.

    #2 – you write CJ has added an average

    ‚Äúchargeback percentage‚Ä? for each merchant, so that affiliates can pick and choose different advertisers to work with, whom they believe to be trusted.”

    — How hard can that be for google to implement?

    #3 – see #1 – in short: they are in beta, they can always add rev-sharing at a later date without much problem.

    #4 – why wouldnt they hire armies of direct marketers. If you remember – this is exactly what they did when adsense started to take off. At first ony really big publishers would get dedicated account reps – nowadays, you can make under 10k a month from adsense & still have a dedicated rep to help u monetize your site.

    #5 – The lead-gen fraud you describe above is on all CPA networks. YEs, while google might be bigger than them all and will have the most (in sheer volume) of lead-gen fraud, i dont see why the % (not volume) of lead-gen fraud will be any greater on google than on the rest of the CPA networks.

    #6 – the beauty of the whole adwords/adsense system – is that if your site is not right for the program, you will make less & less money, until you remove the ads and try an alternative. If you start running CPA ads and see that your eCPM drops to $0.01 (bec ur site is not right for the CPA ads) you will switch to a different ad program / network. So google is saying – we will let anyone have a chance – if your site is right, you will get paid accordingly – if not, we are sorry but this is all we can pay u.

    While, that is alot to execute, if any company is in the proper positioning for this it is google.

    At the end of the day, google has the largest advertiser base & the largest ad network. And publishers will eventually flock to the ad network/program that makes them the most money. And with the largest advertise base & the most online ad spend – google is where that is.

    ~L

  15. Tyler Banfield

    Agreed, they probably felt that this was a good time to jump in and see if they could have any kind of significant success with this type of program. If they do, it will be interesting to see if Y or MSN tries to follow

  16. jim

    I can’t imagine they haven’t implemented it yet, see the IPs that log into an account and if they match clicks on an ad for that site… Boom, dead in the water.

    As for the agenda, i mean a little fraud is okay (nothing is perfect and it’s pretty cool if it’s not perfect and you still gain), you just can’t hit the tipping point where people don’t trust google is doing something and leave… we’re not there yet.

  17. Johnny10g

    Thanks for another great post ShoeMoney – I knew Google wanted to get into CPA but never really appreciated all the downsides. An interesting post.

  18. ZK

    Louis..great counter points. This is a topic that needs more discussion before any predictions can be made. Google can absorb any losses while others still need to make money. Also this is incremental business for them, any infrastructure and resources (people, servers, etc) is already in place.

    Using Shoemoney theory Google sells Coke…now they sell Diet Coke too!

  19. fthead9

    Don’t forget when Google came out with banner options for Adsense many were ready to declare the death of traditional CPM ad networks. Now it is clear that was laughable over reaction.

    I would never discount Google’s market strength but their mere entry into a market doesn’t guarantee success by any stretch, e.g. Orkut, Google Talk, etc.

  20. Joy Cassell

    Interesting post. I have used PPC in the past along with a lot of my clients and we have all experienced fraud. I think Google may have missed the credibility boat if your will. Assuming they get something better it may be a tough sell to previously “burnt” business owners

  21. Mike Mothner

    Shoe, I agree on many of your points, and with the larger point that Google is not going to run the affiliate networks right out the water.

    However, I do think that Google has the ability and proclivity to adapt past many of the points that you brought up. Clearly if this initial test works, they will add other CPA payout methods than CPA, find ways to handle chargebacks, and address the other issues.

    Bottom line is that if the major affiliate networks were able to successfully tackle these issues, Google clearly can as well.

  22. RevShare

    Let me ask this question:

    What if you replaced your PPC campaign with a PPA campaign where the action was the page view? You could control every click! Is it fraud if you say that you will action every page that you decide is not click fraud? You would still have to pay to keep in the listings so that keeps everyone happy. Of course you could take it further than that too …. read my .

  23. Aeiouy

    I agree that Google is not going to have the impact some think. I ultimately think it will be good. Although I think any publisher who does not fraud the system will find their earnings go down and will go back to PPC. I have some different reasons than you for thinking there is nothing to worry about. I did elaborate on them over at Wickedfire.

  24. Ryan

    Thanks for sharing your thoughts on this matter, as you obviously have plenty of experience in the CPA arena. It’ll be interesting to see how this pans out for Google, as they’ve got a lot of shareholders that wouldn’t be happy if they rushed into this without thinking it through first.

  25. Jeremy

    I abandoned Google Adsense in favor of Azoogle. I was tired of Google choosing what I should try and “sell”. With azoogle, my affiliate manager actually visited my site and talked it over with me in real time. Then he sent me his recommendations. Unless Google does something amazing with this new venture they will never get my business back.

  26. knupNET

    Google doesn’t fail at much of anything these days. I look for them to take control of this market in the near future. Who really knows though – just my opinion.

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  29. Scot Smith

    Google is good at innovation. I think they will make sure their ducks are in line here, the things pointed out in this post seem amateur.

  30. Daniel

    I agree that the PPA will not have nearly the success of the PPC. First and foremost because people do not have the time/expertise to made the required modifications so that a PPA ad works. A PPC box you just throw anywhere on a blog or website and people click, no big deal, which is partially the reason for the success of Adsense.

  31. geegel

    Another potential flaw in this program is the strong possibility that merchants could go over their budget, because a latency may appear between the moment a visitor clicks an ad and the moment when he pursues the paid action.

    I honestly believe that Google bit more than it can chew.

    Regards, George

  32. Jay

    I agree though I think most publishers are a litter concerned that CPA will overtake PPC advertising which would make our income more unstable

  33. Jay

    MSN and Yahoo seem pretty behind the curve on this.. MSN doesn’t really even have an established PPC network yet to attract publishers.. Yahoo as well is just in beta format so far :(

  34. Jay

    I somehow believe click fraud is a much bigger problem then they let on.. sure they say customers only find .02% of clicks are fraudulent but then again how many adwords users really have click tracking software ?

  35. Jay

    I would love to try azoogle, one thing I hate about google is there utter lack of respect for their publishers! Sure they send out a little Christmas present to their decent sized publishers but they just don’t care if your having a problem or not.

  36. Jay

    I wouldn’t say they don’t fail at much.. half of the new ideas they try never really take off or are abandoned… Maybe Im off on something but I think they just launch new things to get publicity

  37. Jay

    perhaps but with adwords google often figures your budget out over a months time or least it did when I was using it a year ago.. That meant you might go over a few days if you went under at some point before ie if you have a 100/day budget and one day you only spend 80 then Google would let people click on your ad above $100 to make up the difference… Anyone know if thats changed ?

  38. Jay

    Why can’t a CPA be placed the same as a PPC ad… Only difference is you get paid per sale or action as opposed to clicks.. Though it might make people rethink the ad placement since right now you want to generate loads of clicks regardless of quality..

  39. Jay

    That would definitely make things interesting though given Google’s model I would think they’d maintain there current open atmosphere and most advertisers being smaller businesses then the ones on CJ probably wont be picky after all they only pay for sales or actions they choose

  40. sfod_d223

    Believe it or not I turned down “G”‘s invitation to its beta program. Not really into the whole “G” thing and how big brotherish they are.

    Long Live AzoogleAds!!!

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  42. Maki

    Hmmm .. I had a different experience. As for Azoogle, I kinda like having someone to call when I had an issue or want to talk about increasing the rates. Google is kinda aloof to most publishers unless you’re premium I think.

  43. Maki

    CPA is just as easily implemented on blogs as Adsense. Auction Ads is a good example. There’s really no need to go out of the way to create landing pages if one doesn’t have the expertise to do so.

  44. Jay

    I agree totally and thats what makes me a little worried about Google getting into CPA.. Though Im sure advertisers will gooble it up…

  45. Jay

    Im not really premium but I wouldn’t call myself a nobody either when we had our experiences with Google’s customer support we got obviously canned responses that didn’t really answer any questions.. Maybe I just expect to much from them..

  46. Jay

    Ya I really really wish Yahoo opened its doors to Canada, we would love to give them a try.. Comeon Yahoo throw us a bone here!!

  47. Stephanie

    Great points. I’m all for watching and seeing how Google copes with all of the potential issues. No interest in trying it out early on.

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  50. ToddW

    I agree. Who cares if you get 5 cents a click or 1 dollar per-action if it leads to the same eCPM in the end. People wont have that instant gratification from seeing a click equal moeny but in the LONG run it may be better ($) for some to run CPA.

  51. ToddW

    Until they have to investigate your account and don’t reply for a couple weeks… they only take care of you when it’s easy for them ;)

  52. Jay

    If Google can manage to put their own spin on things, they may not put every other CPA company out of business but they can sure put the squeeze on and limit future innovation from small players looking to get some market share.

  53. Jay

    The payout for CPA is usually much higher then an adsense click.. If your getting $10 for an action or $1 for a lead you can do things to game the system that weren’t feasible at .10/click

    For example you could have a network of people who was paid X dollars to go and visit an alternating list of sites every few days or whatever and sign up for news letters or whatever the action is.. Just a thought

  54. Jay

    I could see it going well for alot of people, I mean as long who ever is running the admin side of things does a good job of creating an action which leads to more profit then expense then how can they go wrong? Though yes I recognize when it comes to lead generation even a child could poke holes in the best argument I can come up with

  55. Gary Lee

    I’ve applied to do the CPA based advertising with Google, but have yet to be accepted. I would really like to see an example with numbers from you if possible.

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  58. DanyO

    Don’t forget this is just Google’s first stab at “in content” ads. As time goes one, they will refine and enhance their offerings.

  59. DanyO

    True, Google does have a few lemons in it’s service portfolio, but keep in mind that Ads are Google’s bread and butter, so they will have some of their great minds working on it. It’s no guarantee that it will succeed, but then again I think we’ll see a lot of improvement to their CPA model in the next few months.

  60. DanyO

    true, you can count on a lot of publishers leaning towards Google’s CPA, because it’s all integrated with their Ad network, no need to sign up and get several checks from other networks.

  61. Webmaster Labor

    I agree with your conclusion that, at this stage of the game, Google’s foray into the PPA arena is not well thought of. It doesn’t shut out the possibility that they would innovate and build on many of the existing affiliate programs’ approaches to the issues you raise. Example: remember Goto.Com?

  62. Ashwin

    google should just relax. They make more money than anyone else. their entrance into the ppa arena aint brilliant, but knowing them, they’ll bounce back

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  64. coop

    i dont think google ppa will make a dent in the scene… hopefully it will eat up the newbs bidding on offers on other ppa sites like azads or cpaempire

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