Google Steps up Pace on Moving Into Major Ad Incumbents' Turf

Implications: "In the end, CPA Optimizer moves Google one step closer to becoming a true broadcast company and take on the run of network display business in advance of their integration of Doubleclick, or perhaps in spite of Doubleclick." (Source:Digital Moses) Web-based affiliate marketing has been all the rage and incumbents ValueClick (VCLK), Linkshare, Think Partnership (THK), Time Warner's Advertising.com (TWX) could stand to take some punishment as Allmighty Google (GOOG) steps in to their turf. Incumbents will need to quicken the pace of acquisitions that divest themselves of reliance on Google as a main point of ad distribution. GOOG is further positioning as an ad solution that offers comprehensive flexibility and will reap the benefits.  How?  By offering direct response marketers cost-per-acquisition (they call it "pay-per-action") ads AND a new cost-per-click optimization tool that measures traditional click ads against  advertisers' target customer acquisition costs.

Analysis: Google and Yahoo! (via Overture) birthed Web cost-per-acquisition "affiliate marketing" NOT by entering the scene as a player but as an enabler.  They provided the platform for just about anyone to engage in advertising arbitrage (buying surfers "low" at Google.com and selling them "high" to major name retailers on a cost-per-transaction basis).

Gone are the days of mom-and-pop affiliate arbitrage operations that powered affiliate networks -- now owned by the likes of ValueClick (Commission Junction) and Think Partnership (Kowabunga Technologies).  These networks have been reduced to growth via acquisition of distribution points that are not overly reliant on Google -- as an example, ValueClick's acquisition of Mezimedia.  But they'll need to pick up the pace if they're going to survive against Google's latest move into their "performance" or cost-per-acquisition ad turf.

Indeed, Google has quickened its pace on moving against affiliates and affiliate networks themselves.  Google is slowly but surely biting the hand that has fed it and is now courting advertisers directly.  They're eliminating the middle-man.

Why?  According to Digital Moses, an industry trade, "Google does things for Google. This move might seem to help the advertisers, and indeed it will for many, but the desire to help them didn't drive the change. The need to make more money did."

The Editor, who wishes to remain behind the scenes, goes on to say (and notice his word choice)...

"Google has threatened to do this for some time, beginning in June of 2006 when they announced their first CPA venture, the content referral network, which they followed up with Pay per action beta in March of this year with the official launch taking place towards the end of July. With their usual genius, Google leveraged their expansive publisher network to gain the necessary insight into performance – leveraging their long tail of often underwhelming publisher placements – as well as building up an increasing stable of advertisers....

Having all those pieces in place – CPA advertisers, the publisher placements and acceptance, Google could then connect the two and offer advertisers a true CPA product. And, that’s just what they did on the 24th of September."

Similarly, Umair Haque suggests, "That’s Google’s strategy—it’s about edge leverage creating enormous amounts of space for new strategic moves in a industry bereft of any kind of strategic.”