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Google tests new ads

Under cost-per-action system, advertisers pay only when ad leads to sales lead or purchase.

Google is testing a new online-ad system in which advertisers pay only when their ad leads to a purchase or a sales lead, the company confirmed Thursday.

The new cost-per-action system will be a separate ad auction system from the current cost-per-click setup, Google spokesman Brandon McCormick said. The ads are being offered through Google's AdSense unit, which places ads on Web sites.

AdSense publishers will be able to choose from a selection of ads and will have more flexibility in promoting the ads, according to Google.

Because they'll be tied to a purchase, the new ads are expected to be auctioned at higher prices than cost-per-click ads, which cost advertisers every time an ad is clicked on, despite whether it leads to a sale. The ads also would cut down on click fraud, which occurs when ads are clicked on without the intention of making a purchase.

"We're always looking for new ways to provide effective and useful features to advertisers, publishers and users," Google said in a statement. "As part of these efforts, we are currently testing a cost-per-action pricing model to give advertisers more flexibility and provide publishers another way to earn revenue through AdSense. We're pleased with how the test is progressing and will continue to gather feedback from advertisers and publishers."

Kelsey Group analyst Matt Booth said the move was smart for Google and that Yahoo also will eventually be offering cost-per-action ads. "Actions like telephone calls, lead forms or transactions are more valuable than clicks," he wrote in an e-mail statement.

McCormick would not say how many advertisers are participating in the test, which was first reported by David Jackson on his Seeking Alpha blog Wednesday.