Google Busts Out a New Ad Trick

We're all familiar with John Wanamaker's famous lament: "I know half of all my advertising dollars are wasted, but I don't know which half." The problem is that it's nearly impossible to know which advertising agencies, channels, or individual ads are responsible for stimulating revenue.  But Google's new ad program may change that forever -- and at just the right time, too.

Just weeks after Yahoo! came out with the Panama Project, a system designed to maximize return for its pay-per-click advertisers, Google has begun the trial phase of a pay-per-action ad program that could eventually make pay-per-click programs extinct. The per-action framework requires advertisers to pay up only when customers actually do something, like, say, make a purchase.

A few smaller firms have offered pay-per-action programs for years, but Google's trial run suggests the internet search battle has entered a new phase of competition. There's just one pricey catch with Google's new program: advertisers pay about 100 times more for per-action ads, according to a BusinessWeek article by Catherine Holahan.

On balance, the big question is whether marketers will ultimately prefer the accountability of Google's pay-per-action program over the efficiency of Yahoo's newly optimized per-click model.  Two very different strategies to win one very big pie.  Stay tuned.