is Liquidity . . .

Snap has been tauting the value of PPA (Pay per Action ) for a while, and I certainly believes that in many ways its a superior model to PPC as pioneered by Overture/Google. (less spamming, higher monetization, less agency issues. . .etc) (What is eBay BTW then a PPA network?, so I do think the model has significant merits . . . AFTER liquidity has been achieved)

Today, Snap launched a whole bunch of new features hoping to gain the kind of buzz ASK did the last few months. And ofcourse, spent some time tauting PPA again.

Snap Rethinks Search
Snap, a search engine promising pay-per-action
Ads? Content? Snap.com Blurs the Line
Snap Realizes Own Desperation, Uses it as a Marketing Angle

The problem with PPA is liquidity. In the PPC world, agents (aka SEM firms, spammers, arbitragers, speculators, brokers, market makers etc) actually play a very very important role in the Google ad market. (No, they are not just parasites) Just like the stock, bonds, or commodities market, agents brings liquidity in the market which enables

1) efficient pricing
2) enable principals to hedge out and offload risk to third parties
3) enable principles to participate in the market semi-passively/arms length
4) helps the marketplace scale significantly faster

In the PPA world, the arbitragers do not play a role becaues conversion requirements of PPA . . . requiring principals to participate in the purchase of “advertising” directly. As a result, keyword auctions will often not recieve enough participants to be priced correctly especially in early days of ramp up. Furthermore, PPA networks will need to invest in directly acquiring retailers instead of relying on speculators (keyword spammers?) to bridge the gap between the market and retailer - thus increasing marketing cost. Speculators also help a market grow and scale as Google did between 2000-2003 when keyword arbitragers helped Google scale before principal advertisers (retailers in this case) began joining Google enmass as well.

All is not lost of course if spam becomes a bigger issue for GYM . . . for now though, Snap needs to partner more broadly to offset its liquidity issues.