Google PPA Ads: Pros and Cons

Yesterday I blogged about the pros and cons of Google's PPA ads from the ad publishers' persepctive on my MoneyTies blog. Today I want to look at the pros and cons from the perspective of the AdWords advertiser.

Introducing Google PPA Ads

But first, a brief word of introduction about this new advertising model.

In a press release on Tuesday of this week, Google announced a limited beta test of its new Pay-Per-Action ads. This new pricing model is initially available only to U.S. advertisers. PPA ads will be shown on the AdWords' Content Network.

Under the PPA pricing model, advertisers only pay when the customer completes some predefined action on their web sites, such as completing a sales transaction, registering for an online course, etc. It is also the advertiser who determines the values of these actions.

In addition to this new form of AdWords advertising, Google is also taking this opportunity to introduce a new type of advertisement: text link ads. This is in addition to the standard text and image ads, which are also available to PPA advertisers.

So, what are the pros and cons of this new form of AdWords advertising for you, the advertiser?

Pros

Greater Cost Control
Under the PPA pricing model, advertisers only pay when a desired action occurs. Futhermore, the value of the action is determined by the advertiser. This gives advertisers much more control over their advertising costs. In addition, this model provides a solution for one of the most common complaints of the existing pricing options (CPC and CPM), particularly CPC. That is, that advertisers have to pay even if no customers ever buy what the advertiser is selling.

Ease of Cost Management
As well as greater control of costs, the advertiser also knows in advance what the profit per conversion will be because it has already been predetermined in setting the value of the action. Thus, advertisers using this pricing model will not need to continually monitor their ROIs ("Returns On Investment") in the same way that is necessary under the CPC pricing model in particular.

However, it goes without saying that advertisers who have previously used conversion tracking will need to monitor the overall effectiveness of their PPA compaigns as compared to their prior CPC or CPM campaigns as it is possible that these previous campaigns could have produced a better return.

Increased Choice
The introduction of PPA ads increases choice for advertisers in two ways.

First, the very introduction of this new pricing model gives advertisers another means of advertising in addition to the existing CPC and CPM ads.

Second, the introduction of the new text link ad format (with apologies to Text-Link-Ads.com - I sense a potential lawsuit there!) gives advertisers a new and exciting ad format to experiment with.

Cons

Lack of Control
There are three ways in which PPA ads provide advertisers with less control as compared to the standard text or image CPC ads.

Over Web Sites
First, PPA ads will only be made available on the Content Network, that is, as AdSense ads. This means that your ads could end up being shown on any site in the Content Network and the only way you can prevent your ads from being on particular sites would be with the site exclusion tool. However, it is unclear at this time if the site exclusion tool will be available for PPA ads. In fact, given that

AdSense publishers are able to choose whether they want to serve pay-per-action ads on their sites. Publishers can select between an individual ad, a shopping cart of ads, or a specific term or phrase that is relevant to their site’s content . . . publishers [have] control over which pay-per-action ads are shown on their site,

I will not be surprised if PPA advertisers will be unable to prevent their ads from being shown on certain sites. This is certainly the case with comparable advertising platforms for affiliate advertising, such as Clickbank.

In addition, the very fact that these ads will be AdSense ads is a potential source of problems, as I've written about before!

Over Adwords Networks
Second, the fact that PPA ads will only be shown on the Content Network means that advertisers will not have the choice to display their ads either on Google.com or other sites in the Search Network. Google.com and the Search Network are arguably better advertising platforms in most cases but they will not be available to PPA advertisers.

Over Ad Exposure
Third, it is possible that no-one will actually choose to display your particular ads on their web site. The choice to display PPA ads, and which PPA ads to display, is with the AdSense publishers. Thus, even if your ads are relevant to hundreds of AdSense web sites, if the owners of those sites do not choose your ads, you will not be able to advertise using the PPA pricing model at all.

This issue also raises another con of the PPA pricing model . . .

The Problem of Price Setting
There are three elements of the problem of price setting that will affect PPA advertisers.

1. Competing Advertisers
First, the price (aka "value") you set for your actions will be competing against the values set by other, competing advertisers. This, effectively, introduces a pure auction for exposure. However, given that the choice is ultimately with the AdSense publisher, an ad with a lower value may still be chosen over one with a higher value. However, how Google will handle the situation when an advertiser chooses "a specific term or phrase that is relevant to their site’s content," remains to be seen.

2. Competing Demands
Second, the advertiser will also need to balance carefully the competing demands of setting a value that is low enough to produce a reasonable return for each completed action while, at the same time, needing to set a high enough value to attract the AdSense publishers who are, effectively, affiliate advertisers.

3. Competing Pricing Models
Third, advertisers will need to try to determine in advance whether the PPA model will produce a better ROI than the CPC or CPM models. If the advertiser has been using conversion tracking, this should be relatively straightforward. However, it will still be of great importance for PPA advertisers to test the effectiveness of these ads as compared to the CPC and CPM options.

Conclusion

PPA ads are certainly a long-awaited solution to one of the biggest complaints against the CPC pricing model and, even though they give advertisers greater control over their costs this control is not without its own problems. However, I sense a bright future for PPA ads and I shall look on with great interest as the Beta test progresses.

Tags: adwords, ppa