Google has launched a new AdSense/AdWords beta feature called “Pay-Per-Action” that lets advertisers to pay for ads only after a user clicks on the ad and completes a certain “action”, such as buying a product or filling out an application. This seems like a natural progression from the newspaper-style cost-per-impression, through the internet’s pay-per-click model, onto a system where advertisers pay for exactly what they want, which is for people to actually respond to their ads. This system is designed to give advertisers more control over their return on investment by allowing them to specify how much to pay when a user completes a desired action, as opposed to calculating their ROI using fluctuating conversion rates from clicks. It is now possible to simply state that you will pay $1 for every user who clicks an ad and signs up for your re-manufactured beanie baby store’s website, and $4 for users who actually buy one, which eliminates a lot of complications in terms of setting ad prices. Another interesting aspect of this system is that conversions are tracked for 30 days, so that if someone clicks a pay-per-action ad and doesn’t complete an action, but goes back two weeks later and completes the defined action, the advertiser still pays. This seems like a very good feature because internet shoppers will often search for alternative products and sellers before making a final purchasing decision, and a previously viewed advertisement can affect this decision.

This relatively new advertising system brings up a host of questions about its motivation, userfulness and possible pitfalls. One noted goal of the system is to cut down on click fraud, which can be the result of ad publishers fraudulently clicking the ads that they hosting in order to get paid per click by the advertiser, which user t3khn3 recently wrote about. This problem can be mitigated if the advertiser only pays for actions that produce monetary benefit. For example, if you pay your ad publisher $1 every time a user clicks your ad and completes an order of $10 worth of beanie babies, then click fraud is non-existent because any ad sale accompanies an actual product sale, which profits the advertiser. This is a major feature of this new advertising system, and it will be interesting to see if this method becomes popular on the Internet in the future due to this click-fraud reduction.