The Transformation of PPC advertising

Arnold Tijerina
I was reading a book (which I highly recommend) called "Socialnomics" by Eric Qualman. The subtitle is "how social media transforms the way we live and do business". This book is great for someone to learn the importance of utilizing social media in their company. For those who haven't seen it, the "teaser" video for this book is here: http://www.youtube.com/watch?v=D08URtovG5s Within this book, it talks about how he believes that PPC advertising will diminish or, at the very least, transform itself away from PPC and towards PPA ("pay per action" - my words not his). What he proposes is a business model similar to frequent flier miles or Microsoft Live's cashback program. Right now, advertisers on GoogleAds are paying for "clickthroughs" so they're basically paying for "potential action" (ie. the clickthrough represents the opportunity for action, not action). If the consumer purchased through the first "click", it would mean decreased revenue for Google whereas if it takes a consumer 20 clicks to make a purchase (or give up personal information), Google's ad revenue increases twenty-fold. What if a company could figure out a business model in which the advertiser pays per ACTION? The example the author used in the book was this: (the following are direct quotes from the book) Historic Search Model: *Advertiser: Hoover is willing to pay $50 to produce a sale for their $200 vacuum cleaner. *Search engine: Hoover has determined that it takes roughly 15 clicks to produce a sale and therefore is willing to pay the search engine $3 per click (3 x $15) = $45 *Search agency: The search engine agency charges 11% commission, resulting in $5 for this buy going to the search engine. *Searcher: Must pay $200 to purchase vacuum cleaner. Socialnomic Model: *Advertiser: Hoover is willing to pay $50 to produce a sale for their vacuum cleaner. In the historic model, they paid $50, but in the Socialnomic model they will pay a net of $40. *Search engine: Hoover has agreed to pay the search engine 10 percent commission of total revenue produced. So in this instance, the search engine will receive $20 for the sale. *Search agency: $0 because they are no longer part of the process. *Searcher: Receives $20 cash back if they purchase the vacuum cleaner; net cost ($200-$20) = $180 He posits that companies would be more willing to pay per ACTION, then CLICK as this represents ACTUAL REVENUE rather than POTENTIAL REVENUE. He also believes that Google would be the LEAST LIKELY to adopt this as, being the leader in PPC advertising and this being a large revenue stream for them, have the most to LOSE (potentially) by doing this. The company that can effectively pull this off would differentiate themselves from Google. What do you think about a shift from PPC to PPA? Do you think this is something that is viable? Would you be more willing to pay per ACTION (product sold, lead generated, etc) then you would for a CLICK? I thought this was interesting and was curious what others thought. This book is FILLED with outside-the-box ideas and how the author believes social media will transform our world...

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