Google is experimenting with a new proposition for advertisers: if you don’t get results, you don’t pay.
The company has said that it would expand a test of a system that allows advertisers to pay only when an ad spurs a consumer to take an action, be it purchasing a product, subscribing to a newsletter or signing up to receive a quote from a mortgage broker or car dealer.
The vast majority of advertisers now pay Google when a user clicks on ads that are displayed alongside its search results or on other Web sites, while some are billed based on how many people view the ads.
“We’re optimistic that it will be something that will be very compelling for advertisers,” said Susan Wojcicki, vice president of product management at Google. Wojcicki said the system would also give participating Web publishers a wider choice of ad types for their sites.
Under the “cost per action” system, advertisers decide what they are willing to pay for a specific action, like a purchase or a software download. Armed with that information, Web site publishers then choose whether to run a specific ad or group of ads on their sites.
Many advertisers find cost-per-action appealing, as it greatly reduces their risk, since they are not charged for ads that are ineffective. The model has long been used online by “affiliate marketing” companies like ValueClick, which have created networks of hundreds or thousands of Web sites that display small ads for e-commerce sites. The publishers are paid when they refer a user who makes a purchase.
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