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3/23/2007
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Google Launches Test Of Pay-Per-Action Ads

Limited program lets advertisers predetermine what actions they'll pay for and how much they'll pay.

Concerned about click fraud? With Google getting into pay-per-action ads, there may be less to worry about.

Google last week launched a test of a new pricing model that lets advertisers pay only for completed actions that they define ahead of time, such as getting a lead, a sale, or a page view, said Rob Kniaz, a product manager for pay-per-action, on Google's AdWords blog. "You'll define an action, set up conversion tracking, and create ads that publishers in the Google content network can then choose to place," Kniaz said.

Advertisers also set the price that they're willing to pay for specific actions. Because they're buying actions, click fraud is more difficult to perpetrate.

chart:  Who's Getting Online Ads?The pay-per-action model, also known as cost-per-action, was pioneered by Snap.com, a much smaller Web search company than Google, and has been adopted in different forms by Turn.com, which provides an online ad service, and Jellyfish.com, provider of an online shopping service. It's advantageous particularly when marketers are selling physical or digital goods because the return on marketing dollars can be measured directly in terms of sales.

Pay-per-action advertising isn't immune to fraud. Jellyfish, which splits its pay-per-action ad revenue with consumers, delays those payments until the goods purchased can no longer be returned. This keeps scammers from buying items, collecting a cut of the ad revenue, then returning the products. No doubt advertisers will have to deal with pay-per-action "griefing," whereby scammers attempt to extort a payment from a merchant for a promise not to make bogus purchases that would increase the merchant's advertising costs under this model.

Google is making pay-per-action ads available only to publishers in its AdSense content network. Publishers can run specific ads or let Google serve ones that perform best relative to predetermined topics, and they can review ads in advance to make sure the ones selected are suitable. Then they sit back and wait for the revenue to pour in.

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