My Own Pirate Radio

Advertising continues to evolve. It used to be “cost-per-impression”: broadcast TV and radio ads, junk mail, billboards, banner ads. Then we got “cost-per-click”, the business model that powers most search engines today. Now a few companies are trying “cost-per-action”, where the advertiser pays only when a click on an ad leads to an action they define… like buying a product.

Google is apparently rolling out a broad trial of pay-per-action with some of their advertisers.

Because they are often paying for actions more likely to lead to sales than would a simple click on a link to a Web site, cost-per-action ads are often more expensive than cost-per-click ads. McGovern says that, on average, advertisers pay about 100 times more for a sale than they do for a lead on a customer, which is arguably what a click is. For example, an advertiser who is willing to pay 5¢ for a click on its baseball card ad is likely to spend $5 or more for a user who buys a baseball card.

This new approach will certainly have its challenges — new types of fraud, for instance — but I hope it goes well. Anything that more closely aligns advertising with results is good… it’s a step towards what we might call “efficient advertising”, and away from the spam-the-world approach that has dominated to date.

Now if we could just figure out how to make pay-per-action work with all that junk mail… hmmm.