Google is testing a new online advertising network, in which advertisers pay only when an Internet user performs a speci

Google is testing a new online advertising network, in which advertisers pay only when an Internet user performs a specific action, such as buying a product or registering for a service.

Published: 22 Jun 2006

Google is testing a new online advertising network, in which advertisers pay only when an Internet user performs a specific action, such as buying a product or registering for a service.

The new pricing is seen as a way to deliver a better return on investment to advertisers, and as a means to combat click fraud.

If successful, the so-called “cost per action”, or CPA, network would extend the search engine company’s range of advertising activities and reduce its reliance on the “cost per click” model that has been at the heart of its early success. CPA networks, also known as affiliate marketing networks, let merchants sign up independent websites to help find new customers for their products or services.

“We are currently testing a cost-per-action pricing model to give advertisers more flexibility and provide publishers another way to earn revenue through AdSense,” Google said in an emailed statement. “We’re pleased with how the test is progressing and will continue to gather feedback from advertisers and publishers.”

The website owner is typically paid only when a customer actually makes a purchase, or when they perform some other pre-determined action such as filling in a form on the merchant’s site with their personal details.

As per the information available, websites that take part in Google’s test will be able to select merchants whose adverts they want to carry on their site. The adverts will be carried on a separate advertising network, rather than the AdSense system that carries the company’s existing cost-per-click ads.

According to experts, click fraud perpetrators engage in this practice for two main reasons. First, a company may want to run up a competitor’s advertising costs. Second, a website publisher may want to increase its commission revenue.

“Click fraud is hard to track and detect, and estimates of its incidence vary widely, with some suggesting as many as 20 percent of clicks may be fraudulent, in which case Google’s business could be in jeopardy. Google derives virtually all of its revenue from pay-per-click ads. To a lesser extent, Yahoo, AOL and Microsoft’s MSN division also stand to lose from click fraud,” stated a media report.

Kelsey Group analyst Matt Booth reportedly said the move was smart for Google and that Yahoo also will eventually be offering cost-per-action ads. “Actions like telephone calls, lead forms or transactions are more valuable than clicks,” according to him.

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