At her Search Engine Strategies session, Marissa Mayer was particularly lucid on how approximative Google's keyword auction is versus a CPA (Cost per Action) model, which she referred as the "holy" grail for targeted advertising. CPA is the amount an advertiser pays when a user completes a certain action (click on an ad then register, make a purchase...). Google has already been testing the CPA model for several months in its Adwords advertising program.

"Google's auction is smart and we think it's easy to use and ultimately it helps people understand the value that they are willing to pay for an ad. And ultimately get from that ad. But that's an approximation. We know as advertisers, you have to take a function of your click through rate, the probability of conversion once users get to your site [...] And ultimately try to find out what your willing to spend for cost of sales. And back out to try to understand what you should bid in the auction".

With Google's auction, you don't know for sure your cost of sale...

So ultimately it would be a lot cleaner if you, as business owners, know what you're willing for your cost of sales to be and if you can give me a sale, that's what I'm willing to pay for it. That way you can actually achieve a much better optimised outcome in the auction. Because right now, it's just an approximation...

CPA, the Holy Grail?

So we've been looking at things like conversion tracking [...] to help people understand the likehood of conversion. But the holy grail is being able to use those numbers, ultimately offer a CPA based model. But I think that's a long way off"