Google expands "pay per action" ad test

Google announced on Tuesday that it's expanding its testing of a new advertising program that will make it possible for advertisers to pay for advertising only if it generates results. Under the current system, advertisers are charged whenever someone clicks on an ad. Under the new system (which is being tested by 75 advertisers and 75 publishers), advertisers will only pay if the ad generates an action by the consumer such as buying a product, subscribing to a newsletter, etc.

Obviously, a pay-for-action system holds tremendous appeal for advertisers, but is much less appealing to the websites selling advertising space. However, in the long run, I think it will be good for them. If advertisers only pay for results, they will be more inclined to advertise on the Internet. Expanded demand for ad space on the web will eventually lead to higher fees for the publishers. And, ultimately, companies aren't going to want to pay if their ads aren't generating results anyway. So while I would expect some initial resistance from publishers, I think they should embrace it.