Cost Per Action in the Near Future

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To say that search engine marketing is booming would be an understatement. And pay per click, the method by which advertisers pay each time a searcher clicks on their sponsored link as a result of a search query using relevant terms, is a large part of that industry.


But PPC is not without faults, and rivals such as Snap.com's Ad System could give PPC programs such as Google's AdWords and Yahoo's Overture a run for their money.


Ten years ago, practically no one knew what a search engine was, much less what PPC was. With Google and Yahoo now household names, pioneers such as Bill Gross who introduced the pay-per-click approach at GoTo.com, which turned into Yahoo's Overture, are cashing their checks all the way to the bank.


But Gross is currently backing a redesigned version of PPC: CPA. Through Snap.com, a relatively new search engine that uses the Snap.com Ad System -- now in beta phase -- Gross is essentially proposing a new era of search marketing unlike any offered on the market. With the new search engine and Ad System service, advertisers would only have to pay for click-throughs after a visitor completed a sales-related action such as filling out a form, buying a product, signing up for a newsletter, etc. Hence, the term CPA, or cost per action.


The implications this holds for the search marketing industry are huge. Mainly, this would help combat click fraud, one of the biggest flaws in PPC advertising. It's estimated that 10 percent to 20 percent of all click-throughs are a result of click fraud, costing advertisers millions of dollars yearly.


Though the new service would serve as a deterrent for spider programs that either accidentally or intentionally click on paid ads but never complete an action, the service also would make it virtually impossible for competitors to run up a rival advertiser's CPA without increasing that rival's revenue because in many cases the competitor might be forced to make a purchase on the Web site.


The service also would pose a threat to Google's and Yahoo's paid placement programs. But the two online advertising giants have at least one thing going for them that Snap.com or any search engine trying to take a bite out of the market will have to combat: popularity. Google handled 1.8 billion U.S. searches last month, giving it a search market share of around 37 percent, while Yahoo came in second with 1.5 billion, 30 percent of the market. Since its debut nine months ago, Snap.com has generated only 16.4 million searches.


However, Snap.com recently received $10 million from Mayfield, a California-based venture capital investment firm. We probably will see a non-beta version of the Snap.com Ad System in the near future, and then we can determine whether CPA lives up to expectations.


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