Is Google’s Pay-Per-Action a Threat to Affiliate Networks?

If you’re reading this post, then you can expect a flurry of news covering Google’s beta launch of its Pay-Per-Action (PPA) product for AdWords.

Yep, after years of hinting, Google is finally ready to let us test their platform on a CPA (cost per action) model. (If this sounds familiar, reports surfaced back in June, that Google was offering a limited test of CPA)

The beta test is restricted to AdSense for content in the U.S., will run separate from the regular auction model, and you may not even get a chance to test it for a few weeks, while they roll it out. That being said, this is a significant expansion of the CPC (cost per click) model, with advertisers being given the option of paying when a customer buys a product, signs up for a newsletter, or completes any other actionable task on the advertiser’s web site.

On the publishing side, AdSense publishers will be able to opt-in to display PPA ads from Google and even whether they wish to display a single ad, a cluster of ads or match to a specific keyword that is relevant to their page content. Publishers also get to preview the ads, including company name, logo etc, before the ads go live.

As the broker between the advertiser and the publisher, Google will take its cut of any incentive offered. For example, if the advertiser offers $2 per sign-up, the publisher may see only $1.50 offered for the same sign-up. Google will pass on to publishers the net-incentive only.

Publishers also get a new “text link ad” format (I wonder what Gavin will have to say about that), which allows them to display JavaScript ads that appear as a single text link. Publishers will be able to search for text link ads that match their chosen text string. Perfect for bloggers looking to monetize their site, but would prefer to add embedded text links, rather than whole blocks of ads.

Now, here’s where my post title comes in to play.

A platform that allows advertisers to offer a reward based upon a sale or sign-up?

A platform that allows publishers to select text, flash or images when displaying advertisers incentives?

What does that sound like to you?

To me, it sounds like a clear threat to the likes of Commission Junction or LinkShare – or any other affiliate marketing network. Google, for all intents and purposes, has just entered the affiliate marketing arena, with the battle cry that they can do affiliate marketing better than the affiliate networks can.

Now, I feel obliged to inform you that when I posed this suggestion to Rob Kniaz, product manager for Google’s advertising products, he was very quick to deny any intention to compete in the affiliate network space. “We think this is different from the traditional affiliate marketing industry”, said Kniaz. “[It’s an] extension of the current AdWords product”. Oh really? Kind of like how Google doesn’t see itself competing with Microsoft’s office suite.

When I pushed Kniaz to explain why Google is so keen to distance itself from any associations with affiliate networks, his response was that the new PPA platform offered “more automation, more options, more control” than affiliate networks.

Sounds like fighting words to me!

UPDATE: You can view more details of PPA here.

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