Data Strategy

September 3, 2007

Google AdSense enters affiliate marketing

Filed under: Advertising — chucklam @ 10:43 pm

I don’t remember hearing this anywhere else, so I was surprised when I checked the AdSense site to find the AdSense Referrals program had expanded from promoting just Google products (e.g. Google Apps, Google Pack, Firefox) to third party products.

Most people think of AdSense as “AdSense for Content,” which is you letting Google put ads on your site and you earn money on a pay-per-click model. Referrals (aka affiliate marketing) is very similar except you earn money through a pay-per-action model. The “action” is determined by the advertiser, and it can mean an actual purchase, filling out a form, a software download, etc. The main strategic factor differentiating pay-per-click and pay-per-action is “conversion risk,” or the risk of whether someone who’s clicked on an ad will actually convert into a buyer (or take some other action). Right now the advertisers are taking that risk, and judging from the number of advertisers signing up for Google, it’s a worthy risk to take. The bet with pay-per-action is that Google is in a even better position to take on such risks, as Google can aggregate and smooth out the uncertainty and leverage its informational advantage to in fact reduce such risk.

Of course, other factors will be involved in the success of the program as well. It’s not clear that publishers (i.e. site owners) would care much for the PPA model, although Google may only be testing PPA on AdSense first before moving it to AdWords on the main search engine site. (The truth is, any publisher who cares much about advertising income would’ve gone beyond AdSense long time ago, but that’s for another post.) Advertisers may be hesitant to share so much information with Google, especially if Google is also their main source of traffic. The amount of work needed to integrate all the tracking/accounting is also non-trivial, which may turn off many advertisers, although here Google Checkout may eventually play a role.

The best known affiliate marketing networks are Amazon, eBay, and Commission Junction. I don’t think any of them will be too happy about this development from Google.

AdSense Referrals description

AdSense Referrals categories

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