WSJ reports that Google is testing new Ad format which would allow the advertisers to pay Google on the basis of the sale completion.This is similar to CPS(Cost Per Sale) but would also have a bidding system where the highest commission bidder along with other preference would bag the Ad slot.
The new Ad platform on Google search page would work by allowing Advertisers to set the commission they are willing to pay and then Google’s proprietary matching techniques would decide the best suitable ads on the basis of commission,Ad match to user query and User likeness through CTR among other things.The new ad platform would also allow an advertiser to list more product information and price tag.
The new platform is in beta-testing in U.S and is currently by invitation only.The Google has confirmed this move and iterated,”Test will only be visible to a small number of U.S. users and company is constantly experimenting with new features”.
Google earlier beta tested a CPA(cost-per-action) service, but discontinued it in October 2008 in favor of a similar offering by DoubleClick,another Google owned company. Thus,This action of Cost-Per-Sale marks the introduction of more stringent ad format than the earlier abolished CPA.
This also shows the jitterbugs caused by Bing launch and a move to catch-up with Bing’s superior product search in online shopping arena. Bing is currently attracting advertisers looking for more exposure in listing of price and product related information in the ads.Microsoft currently provides Bing Cashback service which apportions ad revenues to consumers for some of their purchases.
The move is also a possible solution to click-fraud related complaints put forward by many advertisers. Although it might prove very disasterous for the company’s income if the new ad platform is implemented in emerging markets currently reporting lower online transactions. The commission at the same time may be quite high but in total would hurt as PPC rates on certain product queries on Google is already at upwards of above $ 8-15 which in turn may not be matched by the eCPC achieved by new ad platform.
The new move is also necessary in a way if Google wants to prove its mettle as a long term search player and lead the next model in online advertising like it did with pay per click. This would also infuse renewed advertiser’s trust in its Ad network.
Interesting. Do u think this will lower the margins for Google in their ad business … when current advertisers shift from PPC to PPS?
@ sridhar
If its applied in emerging markets like india it would be totally disasterable although current click – product ads quote at very low prices for Indian markets compared to american PPC prices.
Now imagine if google registers 4 clicks for 8$ each and a scenario where google completes a sale in 4 clicks with commission value at $ 20.
So the cpc would be higher(32$>20$) as cps are very less compared to clicks.
The main margins may come from service products like web hosting cos they pay anywhere between 100$(more than what they earn in 1st year) for a single sign-up.These products may augur well for google but would still earn less than PPC and needs to be seen if they qualify for google product service.
The move by google is to attract those advertisers afraid of paying in CPC and wants to pay only when they gets a sale.Thus its clearly a move to capture ad dollars from affiliate marketing companies likes Commission junction.
@sturaga
Interesting !!
That’s a double whammy … because the advertisers in emerging markets are not mature enough to have high conversion rates from day 1 due to lack of expertise or poorly designed web sites … it took years for companies in US to perfect it … so in effect the risk of the learning curve will shift to Google !!
@sridhar
another interesting point put forward by you!U.S based companies enjoy upper hand in marketing and selling anything.