This week, I met with Dave Morgan, who is the CEO and founder of TACODA, a company that develops technologies for online advertising. In fact, he is one of the pioneers of the online advertising business – as he was the founder of Real Media, which is now 24/7 Real Media
He made the interesting point that Google is really just an electronic yellow pages business. However, it is an extremely scalable one.
It also has a great business model. That is, an advertiser only pays if a user clicks on a text ad. This is known as cost-per-click (CPC).
However, this is not necessarily the best approach. What if a user clicks an ad but does not buy anything?
So, now Google is experimenting with another model: cost-per-action (CPA).
Actually, CPA is not new. In fact, some of the earliest Internet approaches were CPA models (such as LinkExchange, which Microsoft purchased in 1998). Also, such companies like ValueClick derive a significant amount of revenue from CPA networks.
I mentioned it to Dave Morgan, who said: "It makes a whole lot more sense for them than trying to sell and optimize print ads. They will do this business very, very well. It is a perfect and natural extension of a great 'yellow pages' business. It will let them build a lot of proprietary algorithms where they infer likely actions from search intent."
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Reader Comments (Page 1 of 1)
6-29-2006 @ 7:04AM
dave mcclure said...
right on target. CPA beats the pants off CPC every day of the week & twice on Sunday.
most press hasn't quite picked up on this story just yet, but i gotta believe the internet merchant community is watching the CPA-based costing model develop very closely.
no advertising fees unless i sell something?
now that's a terrific story.