Can a Cost-per-Action Service Beat Google at the Ad Game?

By Steve Bryant  |  Posted 2006-11-07 Print this article Print

A startup run by former AltaVista CEO Jim Barnett is betting that its cost-per-action advertising system can outperform Google's pay-per-click method.

The news coming out of the Web 2.0 conference today so far concerns the launch of Turn, former AltaVista CEO Jim Barnett's new advertising network that will charge advertisers only when Web surfers perform demonstrable actions.

The basic appeal of CPA is that it defends against click fraud by making the advertising process more transparent. But this isn't a new idea. Companies like have been offering CPA services for a while now (Snap is a search engine, Turn is not). Even the G Poppa started testing a CPA affiliate network earlier this year. \But if nothing else, Turn's official launch gives us reason to revisit the CPA model and explore its possibilities and shortcomings.

First, I think we can all agree that CPA isn't going to replace CPC (cost-per-click) anytime soon. CPC advertising is easier to understand and easier to use.

Second, CPA may not be the best fit for merchants who don't offer direct sales. If the merchant's goal is simply to drive attention to a Web site, CPC seems like the way to go. CPC fulfills the simplest motive behind advertising: brand awareness.

Third, CPA isn't a panacea for click fraud. There are several ways to game a CPA affiliate system -- fake transactions, typo-squatting and spamming, to name a few. Then there's the problem of repeat visits. What if a visitor follows an ad to a site and doesn't make a purchase, but returns the next day or next week to do so? And if a company like Turn tracks that person through cookies, what if he deletes his cookies or purchases from a separate computer?

Finally, as search goes, so does advertising on the Web. Search advertising is a game of scale, and there are way more advertisers who understand and can use the CPC model. The search engines also need to make a conscious decision to promote CPA programs, and it's highly unlikely those programs will replace CPC. After all, CPC and CPA aren't mutually exclusive options. Just as advertisers split their dollars between multiple search engines, so they'll split them between CPC and CPA.

So overall, the launch of Turn is obviously a good thing. Just don't believe the hype when someone tells you CPA will solve all your advertising woes. |

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