Pay-Per-Action Model for On-line Advertising

The on-line advertising industry is based on two dominant business models: pay-per-impression and pay-per-click. The growth of sponsored search has fostered a move to the pay-per-click model because it is less risky for small advertisers. An alternative model, discussed but not widely used in the advertising industry, is pay-per-conversion, or more generally, pay-per-action. This paper discusses the challenges of designing mechanisms for the pay-per-action model and approaches to tackle some of them.