What Does Google Shuttering Its Pay Per Action Ad System Mean?

(MoneyWatch)  When Google announced last week that it would shut down its Pay-Per-Action ad sales system, instead using either Conversion Optimizer or the Google Affiliate Network, there wasn't much of a stir online, and I wasn't quite sure what to make of that.

After all, when the service was announced one year ago, expectations were high that the service would be a major disruptor in the online advertising world. "Affiliate marketing networks like Commission Junction and LinkShare are screwed," was the grim pronouncement from TechCrunch's Michael Arrington. "This is about turning the web into one big pile of junk mail, aimed at getting you to sign up, buy, or commit to something that you hadn't necessarily wanted," warned Publishing 2.0's Scott Karp. Of course, neither of these seemed to have happened. Affiliate ad networks are still chugging along, and the web has yet to become a direct sales nightmare. At the same time, Microsoft recently launched its own Pay-Per-Action ad system under Live Search, which I've written about before.

Was Google stepping out of a market right when Microsoft was stepping in? Unsure of the lay of the land, I turned to four online marketing experts for their take on the news. While the consensus seems to be that Google's PPA model being shut down won't affect the online ad industry much, there were some differing opinions about why exactly they chose to close it down now.

Analyst Rob Enderle of The Enderle Group:

This is more of a replacement as they implement the DoubleClick Conversion Optimizer technology which appeared both to be more successful in market and actually worked better. The goal here is to increase the value of ads to advertisers and then monetize that increased value. Ads that drive to purchase successfully are much more valuable than ads where you don't know the impact on the potential buyer.

Bob Regnerus, president of TheLeadsKing.com:

Google's decision to kill their Pay-Per-Action program will have no effect on online advertisers at all. First, there were not that many advertisers who participated in the program. Secondly, there were not enough web publishers willing to take the gamble on only getting paid on actions rather than clicks. It's simpler for a publisher to entice a click, rather than set up a sale. Thirdly, and most-importantly, the Pay-Per-Action program depended on using Google's conversion tracking system. While we find the system to be rather accurate, we find amongst our clients and subscribers a reluctance to use a tracking tool that provides sensitive sales data to Google. Google's decision was actually predictable. If no one is using the feature, why support it? It won't have any effect on Google or its advertisers whatsoever.

Janel Landis, Sr. Director of Search Strategy & Development for SendTec:

The Google PPA platform was a little outside of Google's competency, which is cost-per-click advertising. Having acquired one of the largest and most mature affiliate businesses, they no longer have a need to evolve an immature PPA program out of beta. Microsoft's PPA program, however, is very different. The acquisition of Jellyfish in 2007 allowed Microsoft to leverage the Jellyfish platform on their own shopping sites, making it completely separate from Google's PPA efforts. Things to watch out for in the future include whether or not Google does anything to prevent affiliates from using Search, as affiliates bidding on brand terms and competing with the advertiser's own ad has been an issue for some time.

Jean Biri, founder of Groupe Biri:

Pay-per-click and pay-per-action are two different online advertising categories that mutually pursued would have eroded Google's competitive edge. Google's decision to opt out of the PPA is a wise business strategy as it keeps its eyes on the ball that's spinning well in its favor. Microsoft has an opportunity to jump on the pay-per-action boat and make it a big deal. While PPC is way bigger than PPA, it's up to Microsoft to make it a big category. Given its resources (capital), it's in a perfect position to exploit this concept. The ultimate winner of course is the advertising inventory buyer, as more choices means more value for him or her. With each giant choosing a camp, the battle between Pay-Per-Click and Pay-Per-Action is going to begin.

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