Thursday, June 22, 2006

Google Content Referral Network

There is a lot of buzz about the new Google beta CPA model advertising program (Content Referral Network). Here are a few blogs discussing it:




But the one thing people always overlook when discussing a CPA model of advertising is that not all websites can convert traffic into sales or even successful visits. Even when provided high quality targeted leads some websites still do a poor job on conversion. This makes CPA an extremely poor option for publishers.

Imagine sending 1000 of hits to an advertiser and nothing converts? Whose fault is it? A CPA model assumes it's the publishers fault for sending low quality leads. But there are a lot of factors that go into a click becoming a sale that stand solely on the side of the advertiser. For example, what if the form on the advertiser's site malfunctions? What if the advertiser's site doesn't look professional or trustworthy? What if the advertiser doesn't have the most competitive pricing?

This being said, unless Google can somehow provide accurate traffic conversion stats for a website and a guarantee that that site will remain functional I would not waste my time sending it traffic. I would just stick to the standard AdSense CPC model.

Here are some reasons why CPC is better than CPA:

1. It forces advertisers to bring good value baring products and services to market.

2. It forces designers to develop functioning user friendly websites that make transactions more likely to occur.

3. It creates more predictable incentive for publishers.

A CPA model puts all the pressure on the publishers and none on the advertiser. It's the exact opposite of CPM which puts all the risk on the advertiser with no guarantee that anyone will actually notice an advertisement. The obvious happy medium is CPC; Advertisers only pay for traffic actually delivered to their site and publishers don't have to worry about an advertiser's conversion problems.

So in summary, if you want to use referrals as your websites primary revenue source you had better be sure the site you send traffic to can convert the leads. If you're not sure, a better publisher revenue model is CPC. And if you're an advertiser - expect traffic from a CPA campaign to convert at about the same levels as a CPC campaign. The main difference is that unless you can convert at a high enough rate publishers will likely drop you and your traffic and brand exposure will also go away.

Sorry to be a stick in the mud, but CPA is so 1998. I'm not saying it doesn't have its place (for example, when referencing an occasional specific item) but as a primary alternative to CPC it just doesn't make sense for most publishers or advertisers.

For those who would like to be in the know, here are some terms defined:

Publishers = Websites that display advertising
Advertisers = Websites that pay to be seen on other websites.
CPA = Cost Per Action (such as a sale completed or a form completed)
CPM = Cost Per Thousand Views
CPC = Cost Per Click

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