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Google dragged kicking and screaming into the future



March 21, 2007 – Comments (1)

Original is here.


According to press reports today, Google (Nasdaq: GOOG) is finally moving to pay-per-action ads!


What's next from America's most innovative company? A way to produce fire without the time-consuming labor of rubbing sticks together?


Pay per action ads have been around forever in Internet years, but they're not in favor with big Goo. It earns far too much money from the old (certainly not evil) model -- packing paid results at the top of the search-results page, where naive users confuse them with real results and click on them. That earns Google cash, but it doesn't necessarily pay a thin dime to the advertisers paying for that click.


Google's also a major gravy train for typo-squatters, sploggers, and sometimes, affiliated click-fraudsters, none of whom would make so much dough if pay-per action ads were the norm.


I'm quite sure that explains why Google's pay-per-action scheme is being shunted away as an affiliate program, rather than becoming the Google mainstream. These ads won't appear on search results pages, because that would water down the special sauce that makes big Goo so tasty to shareholders. So while industry analysts are competing for the Sound Bite O' the Day award and talking up what a great "growth" opportunity this represents for Google, I call shenanigans.


Pay per action, in which Google gets paid only if its ads prompt consumers to actually do something that benefits the advertiser, puts more power in those advertisers' hands. Google has struggled against that for some time -- its obtuse click-fraud refund rules being a prime example. If pay-per-action becomes the norm, it will be great for advertisers sick of paying Google for traffic that doesn't earn them a penny. But it will shut off all that lucrative click fraud, splog exploitation, and meaningless curiosity clicks.


That could be a scary thing for Google shareholders. Perhaps that's why insiders like CEO Eric Schmidt are working so hard to make sure they're no longer counted among that group.


At the time of publication, Seth Jayson had no positions in any company mentioned. See his latest blog commentary here. View his stock holdings and Fool profile here. Fool rules are here

1 Comments – Post Your Own

#1) On March 21, 2007 at 5:31 PM, wkeranen (< 20) wrote:

Pay per click isn't bad. Considering that a lot of users research things in advance, clicking on sites weeks in advance of actually buying something, GOOG deserves a cut if GOOG brought that person to the site initially. Better would be a combination of pay-per-click with a pay-per-action bonus.

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