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Google has expanded its Pay Per Action programme worldwide and is now available to any Adwords advertisers who have had "at least 500 conversions in the past thirty days under Adwords’ conversion tracking tool", according to a press release.

For those of you who do not have access to the Pay Per Action feature on the Adwords dashboard, here's a screenshot (and an enlarged version):

What is Google Pay Per Action?

Also known as pay per event or cost per action (CPA), this is a new model where Google only charges you when you have received some (customer-defined) benefit on your website.

If a Google visitor clicks on an ad that leads to a sale, sign-up, download, form fill-out -- or some other action you pre-define -- then you pay a pre-agreed sum.

If the visitor sees your ad but doesn't click the ad, you pay nothing -- as per the old model. With the new model, however, if the visitor clicks your ad but doesn't buy your product (or fill out your enquiry form, or whatever you have defined as a valuable "action"), then you pay nothing.

So What's the Catch?

There really is no catch. In my opinion, this is a bold, innovative move from the company that is defining business in the 21st century.

No, Really, What's the Catch?

Well, this (really) isn't a catch, but action payments cost more than click payments. Google recommends setting a value of each action at "between $0.50-$300". We can assume that, the higher the value you set, the more likely your ad will be shown.

Few advertisers would pay $2, let alone $300, in the Adwords pay per click model. So why do I insist that the PPA model's higher price isn't a catch? Because, providing that you set the value of the action lower than what it is actually worth to you, you are guaranteed to make a return on investment (ROI).

Why Is Google Doing This?

I have several theories.

1. Google's Philosophy
I believe that the people who run Google genuinely want to offer an innovative, ethical service that provides a win-win; a service that isn't simply about ripping people off. Google's halo has slipped in recent years, but this move is in keeping with its ethical philosophy.

2. Profit
Ethical, shmetical! Google will probably end up making more money this way.

3. Click Fraud
While Google says it has sophisticated algorithms that deal with click-fraud, how can you (or they) know for sure that they are catching fraudsters?

It is hard to dislodge the suspicion that webmasters are clicking your ads on their sites for their own financial reward, or that your competitors are clicking on your ads to hurt you financially.

With pay per action, however, you can avoid fraud. Define a sale as an action, and the "fraudster" will have to pay more than you!

4. The Ever-Rising Cost of Adwords
When it begin, the Adwords programme was great for "mom-and-pop" home businesses. Five years ago, It was not unusual to pay only two or three cents per click.

Today, however, Mom and Pop are competing with Big Business, who are bidding for the same search terms. Sure, the click through rate (CTR) and the quality of your website play a role in determining which ad gets shown first, but when your competitor is paying a dollar or two more than you for each click, guess who's going to win?

Hopefully the pay per action model may level the playing field -- though at this stage, I can't say that for sure -- in fact, the opposite may happen! Let's wait and see.

And Finally
Well, those are my theories. One thing's for sure, this is a new direction in advertising (not just online) -- and will provide excellent fodder for my evolving online book, Advertising the Future.

Tags: adwords, cpa, cpc, google