Commentary

Google's Smart Moves

  • by , Featured Contributor, March 22, 2007

Google is a big company that is leading the online ad industry at the moment, and it tend to take pretty aggressive steps to get even better, which is always nice to see in a market leader. While I have been critical in the past of some of its attempts to leverage its strong search position into a brand advertising position, I want to call out two initiatives that have recently been written about that I think are very, very smart.

Pay-Per-Action (PPA)

It has been rumored for quite some time that Google was going to get into the pay-per-action, or PPA, space. I am sure that it has been on the minds of not only its search competitors, but also on the minds of the affiliate programs and performance-focused ad broker/networks. Well, it has happened. It just opened up its public beta and is now permitting a limited number of advertisers to bid not just on "clicks," but on "actions" as well. In other words, credit card companies can now bid on (and only pay for) "applications submitted" or "qualified applications." An e-commerce company can now bid on "sales." Buying sales in an open, transparent, bid-based auction? What a concept. This is going to be interesting. Here's why I think this is a smart idea:

  • It is what Google's customers want. Google is the world's greatest yellow pages. Its advertisers want leads and sales, not just clicks. Clicks have been a halfway step. Now it can go all of the way to what it wants. Clearly, Google is listening to its customers.

  • It eliminates click fraud. By letting advertisers define the action, they are in control of the qualification of the action. This is not so with the currrent pay-per-click model. Eliminating click fraud will remove a major distraction and cause for friction in the search ad market.

  • It changes the game for Google's current competition. Just when Yahoo Search thought that it was about to achieve parity with Google, Google ups the ante. Panama better be able to sell against actions, or it will be left behind again.

  • It goes directly to where Google's future competition was headed. Enlightened observers in the market have known for years that advertisers aren't satisfied just buying clicks. That is why we have seen companies like Ad.com, Aquantive's DrivePM and, more recently, Turn.com, build its businesses to a cost-per-action model. Given Google's scale, it should be able to lead this sector relatively quickly once it got out of beta and put the product into full release.

  • It is in line with what Google does best. As much as Google talks about its brand advertising initiatives in print and video and audio, everyone in the market knows that it is operating with an arm tied behind its back. It doesn't understand those markets well and continue to be mystified that Madison Avenue hasn't beaten a path to its door. Madison Avenue skills are not Google's sweet spot; PPA performance, sales and service is.

Fewer, More Relevant Ads

Now, if the PPA program wasn't enough market-shaking innovation, we learned both in Google's last earnings call and most recently in a brand new blog post from Robert Scoble that Google is now experimenting with serving fewer ads on pages. That's right, fewer ads. Now, some folks might think that this will depress its revenue, and Scoble's Google contact apparently confirms this. However, it turn out that Google's research tells its strategists that presenting fewer, more relevant ads only results in a short-term revenue loss. Actually, over time, the users seem to trust the ads more and more and ultimately its attention to them (and their clicks and conversions) will mean increased revenue for Google.

Bravo! This is a step that will assure Google's leadership in its space. Consumers want fewer, more relevant ads. All of the research says that. Yet, most Web publishers continue to clutter up its most valuable pages with a Times Square-like display of half-relevant banners, all fighting each other and the content for the users' attention.

Publishers, watch Google here. Sometimes you can go faster by going slower.

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