Issues to consider when deciding whether to opt into Google's CPA test.
Before you decide you no longer need to pay attention to your existing campaigns, Google is only testing CPA on the AdSense content network, not on search results. I don't think CPA advertising will be a home run for Google, but because it's rolling out this program with an entirely new ad format publishers can select, the downside may be minimal for some advertisers. Today, I'll cover some issues to consider when deciding whether to opt into the CPA test.
If you currently manage campaigns on a CPA objective and don't use the Google contextual network because of click quality or click fraud concerns, a test will at least help expose a possible opportunity for performance-based incremental leads or orders. However, there are risks associated with all CPA deals. In Google's case, these risks are unique. I'll get into those risks shortly.
The first thing to understand about a network that sells CPM (define), CPC (define), and CPA advertising simultaneously is the ad server deciding which advertiser to select and which ads to display always makes those decisions to maximize revenue. This means the ad server uses statistics and probabilities to determine which billing method will generate the highest predicted earnings for the publisher (and network).
CPM-based advertising offers the publisher and network the lowest risk. As the page impression happens, the billing software records that impression's cost to the advertiser.
CPC advertisements require the ad server understand the predicted CTR (define) on each ad that might be placed in that particular placement. (Note: behavioral ad servers also factor in the individual when selecting an ad). Google reminds us that as an ad's relevance to an individual increases, so does the likelihood of a click. So when the server chooses between a CPC and CPM ad, it multiplies predicted CTR with the CPC bid to get an effective CPM. The ad server then picks the higher number.
The ad server's CPA calculations have an additional step. The ad server must use not only the predicted CTR but also the predicted conversion rate. Again, it's all gets translated into an effective predicted CPM.
This overview is important because your target CPA and your site's ability to convert traffic affect the willingness of a smart ad-server system to show your ads at all. The higher CPA you select and the better your site is, the more impressions the smart ad server allocates.
Before giving Google your CPA offer, consider these questions:
Conversely, if any competitors factor in early buy-cycle shopping, the branding impact of site visits, or conversions that are untraceable (e.g., those beginning with a search on one computer and consummated on another), then giving Google a CPA offer to run makes little sense because Google's ad server will always select your competitor's ad above yours.
If a test makes sense, given your current campaigns and competitive set, check out these details:
U.S. advertisers are invited on the Google AdSense Blog to submit their information to be considered for inclusion in the program on a rolling basis.
Some risks to be aware of are:
Google's CPA experiment may be a success or an exercise in futility. You just need to decide if you want to be one of the first to join in the experiment.
Meet Kevin at Search Engine Strategies April 10-13 at the Hilton New York in New York City.
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Kevin Lee, Didit cofounder and executive chairman, has been an acknowledged search engine marketing expert since 1995. His years of SEM expertise provide the foundation for Didit's proprietary Maestro search campaign technology. The company's unparalleled results, custom strategies, and client growth have earned it recognition not only among marketers but also as part of the 2007 Inc 500 (No. 137) as well as three-time Deloitte's Fast 500 placement. Kevin's latest book, "Search Engine Advertising" has been widely praised.
Industry leadership includes being a founding board member of SEMPO and its first elected chairman. "The Wall St. Journal," "BusinessWeek," "The New York Times," Bloomberg, CNET, "USA Today," "San Jose Mercury News," and other press quote Kevin regularly. Kevin lectures at leading industry conferences, plus New York, Columbia, Fordham, and Pace universities. Kevin earned his MBA from the Yale School of Management in 1992 and lives in Manhattan with his wife, a New York psychologist and children.
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