Delving into CPA Search

There are few online businesses that I would want to create less than a new search engine. Unless it involves China, user generated content, and/or video, chances are the media and others will treat the launch about as serious as Bugs Bunny takes Elmer Fudd. That is, unless you are the one often credited with having invented the business model that now drives the world’s largest Internet company. The man is Bill Gross, whose Idealab incubated Overture, a company that changed the face of advertising online. Were it not for Overture, Google might not have decided to move into pay per click search. The problem with pay per click search, though, is that those advertising are not guaranteed a profit.

Countless companies can tell stories of overpaying for clicks and feeling as though, instead of them controlling their business, the search engines do. What then, if a search engine created an environment where advertisers can pay not per click but per action. This is exactly what Bill Gross is trying to have happen with his redesigned and relaunched Snap.com. With Snap.com, advertisers can pay per action not per click. CPA search should be the hot topic; instead, what captures most of the articles discussing the relaunch of Snap.com are the technological innovations.

While not the first engine to display a snapshot of the website being referred without the user having to actually visit the site, Snap’s implementation exceeds any of the others that I have seen. Its speed, accuracy, and presentation are admirable. For those who like to navigate with the keyboard, Snap’s interface allows one to scroll between results with arrows, opening pages with the enter key. Ads appear interlaced with organic results not separated from them. Also, the engine does a nice job integrating another neat trick seen in other sites, such as partner site Smarter.com, search query suggestions. Start typing and Snap displays searches containing the letters you have entered. Their corporate blog, too, deserves kudos for helping connect users to the people behind the product, humanizing something that relies on mass computing power.

The clean interface, intuitive user interface, and unique feature set deserve mentioning, but the real innovation from my perspective is the decision to offer CPA Search. If that is the case, why does most coverage include it only as a byline? It can’t work for all advertisers, and it might not work for enough to make snap a financially enviable business the way that Overture was when it sold. The reason for CPA’s somewhat limited applicability has to do with the tradeoff that takes place between advertisers and those that accept cost per action advertising. With cost per action, the burden cannot rest solely on one party. Advertisers must uphold their end of the bargain by creating compelling landing pages that convert. A CPC environment, one where they pay for some level of performance but do not receive guaranteed profitability, forces the advertiser to innovate.

More detrimental to the scalability of a cost per action only engine and related to the applicability of such a model are the countless number of advertisers that simply do not possess the sophistication to engage in cost per action advertising. To do so, an advertiser must know what they would pay for an acquisition. A surprising number of companies know they want new customers but couldn’t tell you how much each new customer costs. The second major issue is timing. Cost per action works very well for immediate transactions – email submits, lead generation, etc. It does not work well for items that require a more traditional sales funnel. A user might search for a car or perhaps a flat screen tv, but rarely will the user who clicks on a high ticket item ad buy it immediately. Without an install, tracking these time delay purchases becomes next to impossible. CPA search also does not provide an adequate solution for brand dollars who simply want premier placement. These sites could develop a promotion or in between action, but in the current environment they have no reason to do so.

In the end, the biggest news about Snap.com really is what received the most press, its technology and interface execution. Those are assets that another company might acquire. As for CPA, it makes sense for engines to align their incentives with that of their advertisers. It also makes sense for the engines to want some of the margin for themselves. This is one reason that Acoona, another new entrant in the search space and one backed partially by the Chinese government, has decided to build a lead marketplace for certain verticals rather than accept individual ads. In Snap and Acoona’s case though, they need traffic to really grow in value. Bill Gross might be right about a move towards greater accountability for search spend, but unlike PPC, the model itself won’t create the growth.

Disclosure statement: My employer, Revenue.net offers CPA search across its network of search traffic. We have significant traffic and a commitment to taking on the challenge of CPA search. It does not mean, though, that we are free from the issues that come with it. If we had figured that out already, well…