Google will Now Dominate "cost per action" Affiliate Marketing

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Summary

Yes, AdWords is dying and mobile is ramping up. But Google has already moved and will soon dominate cost-per-action (retail/sales  leads) affiliate marketing. Google is tapping a totally new revenue stream. And ValueClick’s Commission Junction unit will suffer.  As will advertisers not working with Google’s Google Affiliate Network will be compelled to make a switch.

Analysis

Even in times that weren’t that tough, Google has made moves to bite the hands that have fed it.  Namely, cost-per-action (CPA) affiliates.  All as Google finds new ways to serve the changing appetites of small and large advertisers who want sales (retailers) or business leads.  And Google isn’t slowing down.

In a little-known move, Google created its own mortgage comparison shopping “super affiliate” in late 2009 .  But today we find Google on track to dominate a market that just three years ago it had no offering in.

Cost-per-acquisition/action (sale/lead) marketing.  It’s doing so using its control over Web search — which it dominates obviously.  And it’s just as big as the Geo/Local opportunity in my estimation.  Consider how the pay for performance model is even more appealing to advertisers when they pay **only on a sale or lead**. (not clicks)

Here’s an explanation of what Google is now doing for its Google Affiliate Network advertisers and why it’s so huge:

Google is now offering *preferred* search ad placement and superior search ad terms to the advertisers who agree to use Google Affiliate Network (GAN).  Google is literally inserting product images of GAN advertisers’ products into the space occupied by cost-per-click AdWords ads.  Yes, actual product images (making them cost-per-action ‘display’ advertisements) that appear where (formerly) *only* cost-per-click AdSense advertisements are running.

Ever see that before?  We haven’t.  And that’s what makes this a sizable shift — for non-GAN advertisers (ie. those working with VCLK’s CJ unit), GAN advertisers and, of course, Google.

Google is tapping a totally new revenue stream.  It’s literally becoming, itself, an affiliate of its advertisers.  And placing ads directly in AdWords results slots.  Of course, it does this with the endorsement of its advertisers.

And here’s where it gets rich for Google: Many of Google’s advertisers (if not all) are competing with their own cost-per-click/Adwords campaigns in the same space.  They’re participating in AdWords.

Confused?  Don’t be: Just continue to pay Google even if you’re slowing down your cost-per-click AdWords spending.

Indeed, pay Google an inflated cost-per-click price since Google itself (through the GAN division) is now competing for search terms with other advertisers.  The price of that limited amount of space, in Google’s auction, now goes up… for all advertisers competing for that search term.

Hence, although the AdWords market is slowing down Google can prop it up — with demand it creates for itself.

Competing affiliate networks like Commission Junction (a Valueclick company) can’t match these benefits.  In fact, Google’s “bundling” strategy threatens to give Google a position of power in yet another online advertising market.  CPA affiliate marketing.

So while I appreciate the Geo/Local market representing an opportunity the new “GAN aspect” is also worth mentioning.

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Article source: http://www.glgroup.com/News/Google-will-Now-Dominate--cost-per-action--Affiliate-Marketing-51464.html

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