Brian Smith’s post at ComparisonEngines today has some very interesting news regarding Shopping.com’s upcoming test of a Cost Per Action advertising model at its popular comparison shopping site.

The move by Shopping.com is a small step in what I see as the inevitable march towards Cost Per Action advertising. 

But what makes this even more interesting is the way in which Shopping.com is making the transition from clicks to sales conversions.  Taking a page out of the Google Checkout playbook, Shopping.com is launching their CPA experiment within a Universal Shopping Cart in which Shopping will take control of the entire order process AND a large part of the end customer relationship.  Essentially, this universal cart would allow Shopping.com to become a new type of super retailer-a Shopping.com customer can add products from any merchant in the search engine into a single Shopping.com cart and purchase the products directly through Shopping.com without ever having to go to the retailer’s site.

Why would Shopping.com transition to CPA advertising in this way?  In addition to the benefits of CPA advertising in general, I see three specific benefits:

1. They solve the Pay Per Click search engine loyalty problem.  Currently, Shopping.com and other PPC engines have a difficult time creating loyalty with their existing customers because they lack a means to create a strong ongoing relationship.  By setting up a Universal Cart, Shopping.com can create a new user-friendly feature and establish a stronger, ongoing relationship with each customer.
2. They learn more about each customer.  Customers using the Universal Cart will not only store their own personal data with Shopping.com, they will also share their actual purchasing habits directly with the engine. 
3. They enable Cost Per Sale advertising without having to track sales at third party merchant sites.  This has been a big hurdle to the adoption of CPA advertising; intermediaries have been leery of relying on third party stores to track and report their conversions at the merchant point of sale.  Like Google Checkout, Shopping.com has sought to avoid this problem by taking control of the sale itself.  This provides them with a direct and powerful new way to record the sales they generate and in turn, maintain direct control of their revenue. 

But will retailers go for this?  Will they turn over their customer relationship to Shopping.com in this way in exchange for the accountability of Cost Per Sale advertising?  Brian Smith raises these concerns in his post, and many others have already discussed the push back Google Checkout has gotten for controlling the customer (see Greg Sterling’s post here for example).  It will be fascinating to watch this play out.  Frankly, I will be amazed to see a large number of retailers essentially agree to give up a big part of the customer ownership equation and transition into more of a product shipping/wholesaler entity and away from being a customer-centric retailer. 

There is an alternative way to set up CPA advertising that avoids the customer ownership dilemma being pushed by Google Checkout and now Shopping.com.  Namely, allow the end retailer to continue to control the order process and customer relationship and set up a mechanism to record converted sales at the merchant point of sale rather than taking over the sale itself.  This traditional method has been used for years in standard affiliate marketing and it is the method we use at Jellyfish.  I assume you can guess which method I think is better.  Time (and customer demand) will certainly tell whether retailers decide they are willing to cede ownership of the order/customer in exchange for the sale. 

This entry was posted on Friday, October 6th, 2006 at 11:16 am and is filed under Industry News, Cost Per Action Advertising. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.