Will PPA ease out PPC on Google Adsense?

A few days ago, Google Adwords introduced the new pay-per-action (PPA) advertising model on top of the existing pay-per-click (PPC) or pay-per-impression (CPM, site-targeting). Google Adsense ad inventory will then reflect this new development and PPA could potentially take the lead in Google’s ad model.

Pay-per-action advertising is a new pricing model that allows advertisers to pay only when specific actions that they define are completed by a user on their site. Rather than paying for clicks or impressions, advertisers can choose to pay when a user makes a purchase, signs up for a newsletter, or completes any other clearly defined action that they choose. Pay-per-action ads are eligible to appear on publisher sites in the Google content network, and publishers can choose specific pay-per-action ads that are relevant to their site to run in new ad units that they create. {source}

Marc asked me last night why would Google kill the PPC model (their bread and butter) despite the fact that PPA is more effective.

There are two main reasons I believe for this move and it’s mainly due to the fact that the PPC model is growing old and obsolete. Everybody else is doing it from YPN to MSN AdCenter so Google has to evolve or diversify its ad models.

Credibility. Because PPC can be easily manipulated, a sub-industry of click-fraud detection and management has grown to meet the growing challenge of identifying and preventing click fraud. This goes without saying that people do not 100% trust Google in correctly auditing valid clicks from the invalid ones The question of credibility is address with PPA. It just cannot be manipulated since an action needs to be done before the publisher is credited for it.

Better Conversions. PPA is more expensive than PPC by several magnitudes. However, the advertiser is only paying for traffic that has converted which he will be happy. Likewise, the cost of converting a visitor will be more expensive. Imagine if a high paying keyword like VoIP, insurance, credit cards are at $5PHP 293INR 424EUR 5CNY 36 per click right now. An advertiser might bid much, much higher than that (say $25PHP 1,467INR 2,119EUR 24CNY 182) for a PPA conversion because that one will surely get them a subscriber/client compared to PPC.