Google takes on Affiliates? Probably Not.

Google announced that they are entering the CPA (cost per action) market, dominated by Commission Junction, Linkshare and others - and known formally as affiliate marketing. Google's move is an attempt to curb click fraud, since compensation is made only when a pre-defined action is taken, other than a click. For instance, click over to Prudential and fill out a form for a term life insurance quote is an action, a lead. Click frauder's won't spend the time to fill out forms to achieve their devious goals.

David Jackson, at the Seeking Alpha stock blog submitted his view that this move by Google spells the demise of Value Click and CJ. In fact, he is selling Value Click short. However there are many flaws to this prediction.

1. Google's track record for new business entrants is not stellar. Google Base, which some predicted would take on eBay - did not. GMail would spell the end of Yahoo and Hotmail, it did not. Google News did not cause a ripple in the online (and offline) news business.
2. Advertisers will divert their dollars to the the new Google CPA - is doubtful. Why? because advertisers want control in ad placement and where/when their ads appear. Adsense, which is the contextual click program by Google, can be placed on most any sites, and positiond in any location - as deemed by the publisher. This takes the control and brand protection out of the hands of the advertiser.
3. As for the publisher, the share (commission/compensation) they can achieve from CPA's may not equate to what they can achieve through the existing networks. Affiliates know they can earn 8% on a sale, but with Google - they are not provided with this level of information nor (I am sure) level of compensation. Adsense does not provide details on clicks nor on exact compensation - so Publishers will lack the robust reporting they rely on for their own control and ROI management.

I believe that David's short sell on Value Click is based on faulty logic or by his belief that anything Google touches is gold. Their capitalization is amazing, but their forays into far flung beta's may hurt them in the end vs more focused competitors. Perhaps this is one reason that Google has not broken out of it's 400 average trading bands. IMHO.   Stephen

Comments

[Shimon Sandler]

It will also be interesting to see if Yahoo and MSN play follow the leader. BTW, cool avatar by Oddcast:-)