Google vindicates CPA (Cost Per Action) / Affiliate model

In a CNet News post today, Google VP Marissa Mayer finally vindicated the model that Clicks2Customers uses in order to manage paid search campaigns. For a bunch of smart people, it’s certainly taken a while for this announcement. Clicks2Customers was founded on the belief that CPA/Rev Share marketing is the future, and to that end, we have even had interns compile sound economic analysis of why performance based marketing is the future of Paid Search.

SAN JOSE, Calif.–On the morning of day three here at Search Engine Strategies (“SES”) San Jose, Marissa Mayer, Google’s vice president of search product and user experience, gave her keynote presentation. She said a lot of interesting things, but of particular note to me was that she deemed cost-per-action (CPA) “the Holy Grail.”

According to Marissa, Google is making moves towards cost-per-action as a more ideal auction-based pricing model, but she also pointed out that it’s a long way away.

As quoted, Marissa Mayer states that the model is a long way away, as per my prior analysis on CPA posted last year (and also this one).

What Google realises, but often overlooks, is that affiliates have been successfully arbitraging CPC to CPA for longer than Google even begain doing paid search. We started Clicks2Customers in 2003 and that business quickly grew on the back of the fact there was considerably margin between CPC & CPA – and even today, there are still a number of affiliates out there that still do this very successfully. Clicks2Customers have since evolved the business to a CPA / Performance Marketing Agency, and are working more closely with clients than the traditional affiliate marketers. Our technology was built on the back of ROI creation from marketing campaigns based on CPC costs and therefore is far better aligned to what Google is trying to do, than many of our competitors.

If Google wants to accelerate their move to CPA, they really should focus on who the super affiliates are, and learn from them. Kris Jones put together a decent piece on how Linkshare acquired on of their top affiliates earlier this year. If Google is this serious about CPA – then Valueclick/Linkshare and the other affiliate networks become targets, if Google cracks what the affiliates have been doing all these years.

Saying that it’s a long way off is only true if in fact Google does not acquire the internal skills to do this. It’s very difficult for Google to justify the cost of hiring a top affiliate, as the top guys are pushing out $1m/year paychecks from CPC/CPA arbitrage and typically have their own businesses. There are at least a dozen world class CPC/CPA guys out there – so let’s see if Google makes the move and does an acquisition!

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