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.