This is from a presentation in New York at FOOA by Kim Malone, Director of AdSense at Google.

The first thing to note, is that this product is very much still in beta and is likely to change significantly before launch, however, the basic concept is like this:

Advertiser

The advertiser chooses the Price Per Action (PPA) that they are willing to pay and the category of sites they would like to advertise on.

So the advertiser has to decide what value they place on the conversion which may be a sale, download, form registration or any other measurable result from a call to action.

Website Owner

The website owner choose which Cost Per Action ads they are willing to accept on their site.

Payment

When the transaction is completed the advertiser pays the website owner.

Some very important things to note on all this:

• Google is only a facilitator. They do not get directly involved in the transaction.They provide the technology to make this happen.
• Google will not be the website owner. This means CPA ads will not be available on Google search results pages and other Google sites. It will only be publishers in the AdSense network who CHOOSE to participate and then CHOOSE to accept the ad.
• The big problem is that there will need to be a critical mass of advertisers and websites that want to participate in CPA for this to be viable. This is going to take some time.
• Therefore Cost Per Acquisition is not an alternative option for the usual Cost Per Click (CPC) AdWords product from Google. It is something entirely different.