Will Google’s Pay-Per-Action Ease Click Fraud?

Google is beta testing a different business formula for its AdSense product that eases up on its lucrative pay-per-click model in favor of a pay-per-action model. The new program could help address the click fraud problem that dogs the per-per-click sector of the online ad industry.

The idea with the beta test is to provide advertisers more latitude with ad contracts by stipulating payment only for pre-determined actions that result from a Google ad, such as a certain product purchase or signing up for a newsletter.

Could the pay-per-action model help Google lead the way in addressing the industry’s problem with click fraud? It could, if advertisers are provided more certainty that they are being charged for clicks made by humans, rather than automated programs, for example.

Traditionally, Google and other search players charge advertisers using a pay-per-click model, getting paid when an Internet user goes to an advertiser’s site through a link in a search provider’s ad.

In the latest AdSense beta from Google, publishers are able to choose whether they want to participate in the pay-per-action test on their sites. If they do, publishers can select between an individual ad, a shopping cart of ads, or a specific term or phrase that is relevant to their site’s content, a Google spokesman told internetnews.com. Prior to ads being shown on their site, publishers can view the specifics of the ad, including company name, logo and products or services being sold.

Pay-per-action ads are shown only on Google AdSense for content sites. The test is exclusively available to U.S. advertisers who must also already be using conversion tracking or be able to implement conversion tracking code on their Web site so that Google can track completed actions.

Once advertisers sign-up for and are selected by Google to participate in the beta test, they can can create text or image ads in addition to using Google’s new text link ad format, which are brief text descriptions that take on the characteristics of a publisher’s page.

Ben Edelman, a consumer advocate who spearheaded a class action lawsuit against Yahoo over click fraud in May 2006, told internetnews.com that advertisers who choose to participate in Google’s pay-per-action beta test might be able to put some worries to rest.

“Any kind of online advertising is going to be vulnerable to some kind of scam. Picking a method to track and charge for advertising comes down to balancing risks. What Google has proposed so far seems like a reasonable balance of risks.” Edelman said.

He said the main benefit of the pay-per-action model over the pay-per-click model for advertisers is that publishers can no longer make money by clicking on or paying others to click on advertisements on their own site.

Google Product manager Rob Kniaz insists, however, that fighting click fraud had nothing to do with Google’s decision to test the pay-per-action model.

“We didn’t think of it in the scope of click fraud at all. This was purely in response to what advertisers told us,” Kniaz told internetnews.com.

But don’t be surprised if Google’s new product helps to address the issue. Yahoo is making similar moves to let advertisers know it hears their concerns. The search and media portal just announced the appointment of Reggie Davis to vice president of marketplace quality. Yahoo said the new position is part of the company’s efforts to address click fraud, traffic quality, network placement and other marketplace quality issues.

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