At least Harvard’s Ben Edelman is thorough in his analysis of three different kinds of cost-per-action fraud, all of which involve a different form of cookie stuffing—making it appear links have been followed when they haven’t. Detecting the practice isn’t exactly rewarding though, and Edelman’s analysis is a bit anticlimactic.

Previously on the Internet, the big topic was PPC fraud, also known as click fraud, where bots or teams of clickers would go out and click on ads in order to obliterate a competitor’s search ad budget and move up their own ads. A couple of settled lawsuits and some tweaks to the system later, cost-per-action became the new wave of referral commerce. Instead of just following one link to a webpage, users had to actually do something—like browse the site, click a specific link on the site, or buy something—in order for referrers and affiliates to grab commissions.

What seems like a simple and readily adoptable solution, though, was an invitation to craftier gamers to make it only appear to retailers users had completed desired actions. This is where cookie stuffing comes in. When consumers visit a specific affiliate site, or load an affiliate banner, just as examples, the affiliate sends also a small iframe of 0 height and width (so the user doesn’t see it at all) which embeds a cookie onto the consumer’s browser that will make the affiliate appear to be the direct referral if and when the user actually visits the target site, usually a larger retailer, like Amazon.

This works because most retailers have an agreement with affiliates that if the desired action occurs within a certain time frame (called a “return-days period), then the retailer sends along the commission. This allows affiliates to cash in on an eventuality without being the direct referral.

Edelman does provide specific examples, and things get a little exciting when he posts actual names and addresses of people who appear to be engaging in these sneaky practices. But there doesn’t seem to be much incentive to nip it, though. In addition to the highly technical and difficult process of identifying the practice of cookie-stuffing, Edelman notes there is little affiliate incentive to do anything about it.

“For some merchants and networks, mixed incentives further hinder efforts to prevent these fraudulent practices. In the short run, affiliate networks and merchants’ in-house affiliate marketing staff stand to lose from rigorous enforcement — reducing their commissionable base, reducing the size of their marketing programs, and distracting their attention from activities that more directly increase their respective short-run compensation. Thus, in the short run, both groups may perceive that they can increase their profits by deemphasizing fraud prevention.”

That is of course, unless merchants start making a stink about paying extra and legitimate affiliates begin caring about affiliate reputations.
 

With the assistance of one of his fellow authors Aaron, formulates an interesting point of view and one I believe cannot be faulted. He notes that the big three search engines have all recently purchased their own advertising networks and the potential for “insider data trading” could exist. Not that anyone believes the big three would go that route, but he notes a CPA model would eliminate the largest concerns marketers would have, should that ever unknowingly happen.

Aaron then goes on to nicely cover why CPA would be positive for marketers, consumers, and search engines. This is the real value of the article in my mind. I am not convinced the industry at large would ever make such a sweeping change, but really explaining the benefits of CPA may help lead media purchasers to consider CPA options as part of their paid search purchasing mix and this I believe is a good thing.

Aaron concludes his article with a compelling argument as to which trends point to a real possibility that CPA could become the standard for paid search. But even he states that he clearly only touches on the benefits of the move to a CPA model and he hasn’t touched on the downsides.

I believe this is one those articles that benefits the search marketing community because hopefully it will generate a larger conversation and encourage many marketers to consider the CPA format as part of their paid search strategy. What do you think about a move away from CPC to CPA? Does it have merit in your mind?

Comments

The continued adoption of mobile devices fuels that idea, and quite possibly Ingenio’s place in it. Major Internet players like AOL and Microsoft have made heavy pushes to the small screens of the mobile world.

Justifying that push means being able to monetize the traffic. Display and search advertising have a role, but Ingenio’s model represents something more effective.

For an advertiser, the value proposition comes when someone calls via an Ingenio link. The caller’s interest in the business has already been established. By virtue of searching by mobile for a local business, the caller represents a qualified lead.

Once the call has been connected, the advertiser pays and Ingenio collects its cut. The action drives this, not the search or the display. It’s measurable and likely of greater value to the business owner and the ad budget.

By The Kelsey Group’s 2006 Industry Sizing estimates of the potential pay per call market, 14 million websites look like good candidates. Here’s the kicker for the business owner: about 10 million of them don’t have a website at all, and 4 million only have “brochure-ware” sites.

With the ongoing push of Internet companies to the mobile world, we expect the value proposition of click to call to increase, as the market expands to $3.7 billion by 2010 per Kelsey Group’s numbers.

Click to call has the advantage of being a dead simple, straightforward way to connect customers and companies. Simple tends to win over complex when it comes to technology, in many ways, and Ingenio looks like one of those winners.

Google Extends Opt-Out Policy To CPA Testing

Over at the DigitalPoint forum, Jim Karter relays an email sent to him from the Google AdSense team:

Your account has been selected to participate in a limited test of an exciting new targeting feature for AdSense. In the next few days we will enable cost-per-action (CPA) ads to compete in your AdSense for content ad units on a limited portion of your traffic, 5% or less of all ad impressions. These ads will look identical to your current AdSense ads, so there will be no visible changes to you or your users.

Your account has been selected because we believe that you’ll earn more by having these additional targeted, high-quality ads competing in your ad units.

Of course, by "your account has been selected," they meant "we’re going to slide them in there whether you like it or not. Hope it works out for you."

But Jim didn’t like it. "Isn’t it FORCING CPA ads, as I was not asked before putting them in. I HATE IT."

Tell us how you really feel, Jim.

To make it worse for him, Google doesn’t give any indication of which ones are CPC or CPA.

"Also," Jim interjects, "this so called test will not show any stats/results to me. CPA results will be hidden in regular contextual ads and I cannot see it only google can."

Looks like Google is making CPA opt-out just like their book scanning project.

            The tricky thing for advertisers is not going to be figuring out how much they’re willing to pay for an action, it’s figuring out how many actions they’re getting, crediting them to the appropriate source, and raising their budget based on that credit.  In order to do this, you can’t think like a search advertiser.  You have to think like a media advertiser. 

            A huge part of the challenge to Google’s CPA ads, was highlighted by my colleague Kevin Lee in his recent ClickZ column.  Without too much repetition, the challenge for the CPA advertiser is going to be competing against all the other ads, including site-targeted CPM and CPC ads, and keyword-targeted CPC ads.   

            The keyword-targeted CPC ads, many of which may benefit from a high Quality Score (which you can only get by advertising on Google.com) are the favorites to receive the highest impression frequency at the lowest cost.  Without a Quality Score on Google.com, and with the low click-through rate and conversion rates that are typical of display ads, the CPA advertiser is the underdog in this contest.   

Because he’s the underdog, he’ll have to pay very high bid prices for the publisher to even serve impressions, let alone get the clicks and ultimately conversions that will compensate the publisher.  However, as those of us in the media world know, a display ad’s click-based conversions typically make up a small percentage of the total conversions that the ad drives.  The rest are what we call view-based conversions.   

The premise behind the view-based conversion is fairly simple, a customer sees a display ad and doesn’t immediately click, but returns to the advertiser’s site later and converts.  Advertisers can track this by dropping a cookie onto every computer that sees their ad, and setting pixels on their Thank You pages to record each conversion and credit it back to the referring viewed ad.   

Crediting view-based conversions appropriately can be a tricky business, especially if you’re running campaigns on a lot of different online networks and offline media platforms.  For instance, a customer may have seen your Google CPA ad, and then another display ad through a different online network, and it was the latter ad that drove the conversion, not the former.  To credit the conversion to the appropriate view, you’ll need a system that de-dupes your cookies and applies the credit to the view that occurred closest to the conversion. 

However, this begs the question, what if my viewer saw two ads, but it was the first ad he saw that really drove the conversion, not the second?  This will require you to review your analytics carefully.  If you see an ad that has a high number of views before a conversion, but is not always credited for the views, chances are that ad is performing well for you, and you may want to increase your CPA, or CPM if it’s on a different network. 

Advertisers can also run into crediting problems if they’re running campaigns on other media, such as TV, print, or outdoor.  A viewer may see your online ad, then see your TV commercial, and then convert on your website.  Your system may automatically credit that conversion to the online ad, but the TV ad may have been the primary conversion-driver.   

To adjust for this, you can set a time limit for crediting view-based conversions.  You’ll have to determine an appropriate time limit based on the extent of your other media campaigns.  For instance, if a viewer converts three hours later, you’re probably safe crediting that conversion to the viewed online ad.  On the other hand, if he converts three days later, maybe it’s because he saw your message on a different medium.  Advertisers will need to decide this on a case by case basis. 

Advertisers who have a system like this will have an advantage in the bidding war for impressions.  There will be a huge gulf between what they pay their AdSense publisher for an action, and what they’re actually paying per action.  If you can exploit that difference and dynamically raise your CPA based on a holistic performance metric that includes view-based conversions, you stand a good chance in the competition against the CPC ads.

Tag: