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With its new Product Ads format, which could potentially be offered on a cost per action (CPA) model as well as cost-per-click (CPC) next year, Google is offering brands an entirely new way to engage in and measure search advertising.

2012 looks set to be a huge year for search. 

Product Ads mark the potential move to a CPA model

The new format, which we are currently testing as the first UK company on the Alpha programme, enables brands to display images alongside the pricing information and product description in their advert, all of which are sourced from the advertiser’s inventory.

In this respect, the new format can be viewed as the big brother of the Product Extensions feature, pulling in data from the Google Merchant Centre to enhance the advert.

However, there is one crucial difference. The Product Ads format comes with an automated element that does away with the need for advertisers to bid on specific keywords and write ad copy.

Google Serps with product ads

Using the potential of the Product Ads tool is easy, brands simply need to upload their product inventory to the Google Merchant Centre, as they would do normally, and then connect that data feed to their AdWords account.

As long as you ensure all the data and imagery available is 100% correct at all times your adverts can display automatically.

The simplicity of the new format leaves little reason for brands not to trial it. Add to this the fact that select advertisers may be able to use this tool on a CPA basis next year and the excitement around this new format is understandable.

How will the cost-per-action model work?

The CPA model effectively enables brands to only pay for actions their adverts result in, for example a lead or a conversion on site.

Having been working on a performance-based remuneration model for years, it’s great to see Google is now recognising the value of this model. However, it is important that brands are not blinded by this new opportunity.

As with any new offering, there are numerous opportunities but for brands that have not looked into the new format in-depth there are also some potential downsides to taking up the new offering.  

The potential downside: loss of control

A CPA model is great for advertisers looking to make sure they get results. However, advertisers should be aware of the potential loss of control this new format could also result in.

Google’s automation makes the process of creating adverts and running paid search campaigns far more simple for brands that have less resource to dedicate to their search marketing. However, by introducing a CPA model, Google is effectively removing visibility of the pricing.

Brands will effectively be in the dark when it comes to their campaign performance; whilst they may know they are getting a 30% return on investment, it will not be clear if this is the optimum for the campaign or if, by managing the programme themselves they could achieve a 50% ROI.

Of course, brands could switch to a manual campaign to see if they can improve their returns, however it is likely that many brands will be too afraid of losing the 30% by switching off the format and so will never challenge Google here.

For marketers, online’s biggest selling point has always been the ability to provide measurable insights that can then be turned into profitable actions. Adopting the CPA model doesn’t destroy this measurability but it could muddy the waters significantly.

How to harness the CPA opportunity

Harnessing the full potential of the CPA model need not be complicated. Indeed for advertisers to maximise their returns from it, there are three easy steps I would suggest:

  • Test all ad formats that Google offers – including the new Product Ads.
  • Test CPA if Google offers it you and see what results it generates for you.
  • Stay close to the detail (using your agency) to stay in control.

Initial trials we’ve run for clients as part of the Alpha programme we’ve seen CPA is 41% lower than other non-branded PPC, although volumes are lower.

However, traffic levels are already rising through the Alpha so by the time the CPA model is offered next year it could be an opportunity too good to ignore.

Sri Sharma

Published 22 November, 2011 by Sri Sharma

Sri Sharma is Managing Director at Paid Search Marketing Agency Net Media Planet. He can be found on Twitter and on LinkedIn.

5 more posts from this author

Comments (2)

Ed Hockey

Ed Hockey, Global Search & Performance Media Manager at Unilever

Whilst I agree that this does look great for brands, for price comparison sites this is another potential issue. Although Google Product search is nothing new, this looks like they are trying to beef up the offering.

What with the Comparison Ads in the finance market, this does feel slightly like Google are looking to expand their influence in the shopping sector. It's interesting that they are continuing to take the view that if you can't sell directly on your site, you can't enter get a Merchant Account, effectively putting them in competition with the comparison sites.

over 4 years ago

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Hero Grigoraki

Considering that CPA is actually the most transparent, cost effective and accountable type of activity, it's interesting to see concerns being raised around that.

Advertisers concerned about the CPA model for their google activity should take another look at the content network their Adwords campaigns participate in - total lack of visibility, control or understanding of the how, what, where.

over 4 years ago

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