Google recently announced that its Merchant program will be transitioning to a new commercial model, called Google Shopping. With Google Shopping, merchants set up Product Listing Ads (PLA) within AdWords in order bid on listings for products within a datafeed. Merchants have the option to use either cost-per-click (CPC) bidding or cost-per-acquisition (CPA) percentage bidding. With a CPA model, merchants pay AdWords on a commission basis and only when an AdWords click leads to a transaction on a merchant’s website.
With CPA bidding, merchants can focus on conversions by setting a cap as to how much the merchant is willing to pay. The merchant will only pay AdWords when the product is purchased by an online shopper; in addition, the merchant will pay AdWords a percentage of the product’s price. In a CPC model, the merchant pays AdWords for each click incurred, regardless of whether the online shopper made a purchase on the merchant’s website.
To implement CPA bidding, conversion tracking must be enabled for your PLA campaign. In order for the CPA model to work, it must correctly track sales and pricing for specific products targeted by your campaign. In the “Conversions” tab of AdWords, select a transaction/purchase conversion and under the Advanced options, select “Applicable for CPA% commission campaigns” and click save. Next, the conversion code must be implemented on your site.
CPA bidding is a great alternative to CPC bidding, especially for ecommerce sites that are focused on their return on advertising spend as well as for merchants who have different cost per conversion goals across a variety of product lines.