THE DEATH KNELL FOR COST-PER-CLICK ADVERTISING?
July 11, 2006

Google is beta-testing a new Cost-Per-Action structure for its AdSense program. Advertisers would pay only when a sale is made, as opposed to being paid on click-throughs.

Getting paid for a click was a breeze. Anybody could do it. Including a robot. Unethical affiliates could sit and click the AdSense ads on their own pages for hours, or use an automated mega-clicker app to do it for them, even masking the IP address of the computer doing the clicking.

This move by Google shouldn't surprise affiliates who've been in the game for a while. CPC based programs have been gradually shifting to Cost-Per-Acquisition or Cost-Per-Action revenue models for some time now. Not only was the CPC system riddled with click fraud, advertisers could conceivably rack up a fortune in click-through costs on random, untargeted traffic with startlingly low conversion rates.

Using CPA models, advertisers will pay higher commissions for genuine sales, but fewer of them, since they'll only be paying for clicks that result in a sale. The click fraud automatons are goners. It's likely that the demise of CPC will weed out the chaff of the affiliate community. Truth is, super affiliates who build content-rich sites and continue to refine promotional strategies may well make more money because they'll drive qualified traffic to advertisers. Aim squarely at targeted market segments. Focus on building relationships with visitors. That's how you persuade them to act. Visitors don't have to invest much in a click. But they must be persuaded to act.

Speculation abounds. Some believe that the new Google CPA structure indicates that Google will ultimately build its own affiliate network that will compete with Commission Junctions and ClickBanks of the world. Some believe that this new CPA AdSense structure will lead to a new AdWords structure for advertisers -- affiliates get paid for sales or leads, not just clicks. Most everyone assumes that Yahoo and MSN will follow suit. But time will tell. Rumor is, Google's new CPA program will be open to the public within a few months.

In the meantime, affiliates had better milk cost-per-click for all it's worth. And start restructuring web sites and revising business models for the Cost-Per-Action world that's coming.