Great news from the Inside AdWords blog: Google Conversion Optimizer is launched. For those of you not clear on this, let’s take a brief look at history. Early ads were all CPM based – pay per 1,000 impressions. This is still popular, and Google supports it. Overture and then Google revolutionized the industry with CPC – cost per click ads, which virtually all ecommerce sites use today.

Most people are also familiar with affiliates, where you pay someone for referring a customer to you if that results in a sale.

Google Adwords now supports CPA – cost per acquistion, which is a hybrid of the above. What happens is you bid how much you are prepared to pay for acquiring a customer (which in my opinion is the single most important metric for marketing). You say “I am prepared to pay up to $5 for every sale my advertising generates”. Google tracks your sales, and runs your campaigns at a frequency, and using targetting that results in you paying no more than $5 sale.

The downside for small shops is you need a minimum of 200 sales/month via AdWords in order to join in the program,  but that’s reasonable (if not slightly annoying for many).