Google's Quest for the Perfect Ad Pricing Model



Case Code : CLMM033
Publication date : 2007
Subject : Marketing Management
Industry : -
Length : 02 Pages
Price : Rs. 100

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Key words:

Google, online ad, AdWord, AdSense, Advertising, product management, pricing, ad pricing model, cost per click, cost per action, click fraud


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Google contended that it had zeroed in on the perfect ad pricing model, "Çost per Action". It was testing this model in its AdWord product. The widely used "Cost per Click" model had been prone to click frauds with Google itself bearing the burnt. If a company of Google's stature goes ahead and adopts this new ad pricing model, it would definitely change the dynamics of the online ad industry.


  » Pricing
  » Pricing models


On August 22, 2007, Marissa Mayer (Mayer), who leads the product management efforts on Google Inc.'s (Google) search products, said that the company’s quest for the perfect ad pricing model ended with the 'Cost per Action' (CPA) model. She likened the CPA model, which Google was testing in its flagship advertising product, AdWords, to "the Holy Grail".

In the CPA pricing model, instead of paying for clicks or impressions, advertisers can choose to pay for a specific action or conversion, i.e., when a user makes a purchase, signs up for a newsletter, or downloads software, etc. Google had been testing this new pricing model in AdWords since the early 2007.

Questions for Discussion:

1. Critically analyze Google's 'Cost per Action' (CPA) model.

2. Discuss the pros and cons of using a CPA ad pricing model as compared to other ad pricing models?

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