PinkMoon - 1:52 pm on Mar 4, 2006 (gmt 0)

In 2004 I did a research for a company, (I am not alloud not mention here, I hope you understand), concerning CPA based advertisements and it's cost efficientie and effectivenes. It turned out, that there are three main reasons why it doesn't work, and probably will never work, and why CPC always be more effective and efficient.

Conclusion one, customers in onlineshops, know for 89,67% (sig. 0.99) where to go. They don't click any adds or links (on other websites except than the online store) from the moment they go online untill the moment they purchase their product.
This means that there is roughly 10% of the online buyers left that clicks on links and adds before buying a product online.

The above tells us only something about the people who already buy products online. However, we also collected data that showed us that, from the people entering a website through an add, only 0.3% to 1.2% actually buys a product with a '*mode' of 0,35% and an average of 0,33% (sig. 0.99). This means that, whatever you are selling, it is not worth it. Any marketeer would tell you that if an adds conversion rate is only 0,33%, you probably shouldn't even bother thinking about it.

Out of google's perspective, I cannot say, only that I doubt that the revenue made from CPA will ever be more profitable than CPC. And like in any other industry, the internet shouldn't be treated any different. If google indeed is going to do what this article says they are planning to do; ie. google wallet, it only takes a minute for others to offer lower rates.

Do not forget that google is a company, which has stockholders. Stockholders like morals, but they like the other M word just a bit better.
If google, indeed wants to change its advertisement business (which is practicly what google is as a business), and they put the piracy/fraudelentclicks morals higher than the revenue. Really heroic, but in a year; no more google.

Above I mentioned that 90% of people that shops online, knows exactly where to go, and doesnt any click any adds or links, remember...? These are the people you want as a store, because they keep coming back. You want them.
The effective way (but I cannot fully back this up statisticly)to make them change their mind, so they will buy certain products (i.e. cds, dvds, games) from another website than the website they usually use; Is through conventional media (newspapers, TV, Radio, etc.)
Compare it to the grossary store, would you suddenly without any information from the media change your mind and try a different grossary store..? Prob not hè.

Anyways, why CPC and not CPA?

For an online store, it doesn't matter that much, they probaly pay less with CPA (depending on rates ofcourse). For now adds are for most online businesses really ineffective. However all those clicks, might give you some name branding.

For Google, they will probably be broke in less than 4 months.

The only thing I could think of is, that it will be a mixed system.

- Paul

* Mode = Most common value