October 31, 2012 by Scott Innes
Search engine optimization (SEO) represents a large portion of online advertising activity. In 2007/2008, Google started experimenting with pay per action (PPA) advertising as opposed to the traditional pay per click (PPC) advertising. Although they seem to have stopped pursuing this model, I would like to review this model and discuss the pros and cons. According to Inc. Magazine online, there are three simple steps required in PPA.
1: Select categories and keywords – just like you would in PPC
2: Bid for placement – similar to PPC but also bidding on how much you’re willing to pay for a certain action, like a phone call.
3: Pay for action – pay the search engine (Google in this example) for the activity.
Google has outlined a simple beta test outlined in the link to go over specifics in 2007.
Wordstream outlines the pros and cons of PPA very well. This system would of course cost a much more money than the traditional PPC advertising, however, the firm paying for the PPA would be guaranteed their return on investment because it is easily measurable. Firms would absolutely love this model. They don’t have to pay for mis-clicks on their ads, or high bounce-rate viewers. PPA also reduces a company’s risk for online advertising. They only pay for success and there is no threat of click fraud.
One of the downfalls to PPA advertising are mismanaged websites and/or goals. For example, if you are paying on a PPA contract and you only pay when a viewer phones your store, those phone calls might not translate into sales. Since PPA hits are much more expensive than PPC, the expenses can really add up. Websites must work with the goals to ensure that the goals translate into sales.
One of the problems with PPA is that Google doesn’t make as much money as PPC. Google doesn’t get paid on mis-clicks and/or high bounce rate. Basically, what is beneficial for the companies/customers is harmful for the search engines. For every dollar that the companies saves, Google loses that in revenues. I believe that until this problem is solved, the PPA payment system will not see the light of day.