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.
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.