Let’s first examine the main reasons why advertisers should be abandoning PPC in droves:

1. Cost

According to the Fathom Online Keyword Price Index, the average keyword price paid by online advertisers reversed a downward trend and increased 16.5% percent to $1.48 in the third quarter of 2006, up from a $1.43 per click at the end of 2005.

That’s one report. Another compiled by Click Forensics concluded that the average pay-per-click search-term cost was $4.51 across retail, financial services, health and fitness, technology and entertainment advertising. Whatever the average cost, it’s too high for most small to medium-sized businesses.

Averages don’t mean anything. One could pay $10 for a keyword phrase in one industry and 2 cents for another keyword that doesn’t see much demand. What really matters is the competition for the specific keyword you’re bidding on. If there is a lot of it, you’ll pay more. Will that drive prices out of range for small business. Probably. In a lot of cases. However, small businesses have an advantage over the big guys and that is less local competition. Bid on keywords with a local geo-targeted emphasis and see what happens.

2. Click Fraud

You gotta love stats. In researching this article, click fraud was cited as running anywhere from a low of 2.0% to a high of 35% - a range guaranteed to put a smile on the faces of government flunkies that like to boggle the public with reams of out-of-context figures. Since stats can be massaged to support just about any argument, I won’t bore you with a list of supporting links.

If you’re interested, just do a search on “Click Fraud percentages” or “35% Click Fraud” and review at your leisure.

The problem with click fraud is it’s hard to prove. If I bid $2.50 on a keyword and a competitor manages to get himself and his friends to drive up my advertising bill by $20 per day, that could add up. But if he and his friends are clicking on my ads from different computers every day, it will be difficult for me to prove that’s click fraud. On the other hand, trends do tell a story. A noticeable spike in PPC spending when historical trends show they should be at a certain known level are hard to ignore.

3. No Accountability

PPC engines bill without providing any backup as to the origin of the clicks received. It’s the “trust us” philosophy of business. Hey, if you’re not savvy enough to look for, or find, fraud, then obviously there wasn’t any. Why would you think otherwise?

Not all advertisers, however, are content to accept the “trust us” approach to customer relations. Expect more suits like last year’s class action suit against Google.

It will likely take more lawsuits before any changes in the model take place. There are no accountability measures in place at any of the PPC search engines. How you can successfully monitor ads to cut down on click fraud is beyond me. It’s not as bad as Enron and WorldCom but I don’t blame advertisers for being leary of the “trust us” method either.

Generally, this group is impressed with numbers. If they receive hundreds of clicks per day on a PPC ad, they are in click heaven. The same group is especially enamoured with all things Google. All other advertising models are measured against Google’s AdWords and AdSense programs and found wanting. The problem is that only God and Google really know where their clicks and impressions come from, but why worry since both subscribe to “Do No Evil”.

I really don’t see why more advertisers aren’t using the smaller PPC search engines:

Kanoodle
Search123
GoClick
7Search
MIVA

These companies are just as reputable as their big counterparts and there is less click fraud. Plus, you can bid on popular keywords for much less.

So, if pay-per-click is a poor choice for your advertising dollars because of rising costs, fraud and lack of industry accountability, what are the alternatives?

1. Organic SEO (Search Engine Optimization): The blanket term used to describe the unpaid, algorithm-driven search results of a search engine, and the methodologies used to achieve such website rankings.

Yeah, we’ve known about this for a long time. SEO. It works. Better than PPC.

2. Paid Inclusion: Refers to the payment of a one-time fee for placement of a website listing within a search engine’s paid or organic search results. Not as popular an advertising model as it once was (read not as much money in it for search engines) but could be poised to make a comeback.

This model used to be the main revenue generator for a number of search engines with Inktomi being the best known proponent. Advertisers would pay an annual fee to appear in Inktomi’s search results as well as the results of other engines powered by Inktomi. The hook was frequent crawling (every 48 hours) which allowed webmasters to see the results of their SEO efforts quickly.

Until consumers discover such advertising models and buy into them they won’t be nearly as popular as PPC. Pay-per-click is popular because there is the perception that you only pay for a targeted lead. If that benefit outweighs the threat of click fraud, PPC will continue to win out. Proponents of other advertising models need to persuade the rest of us that their way is better.


3. Cost Per Action: From an advertiser’s perspective, this could be the ideal advertising model since the advertiser would only pay for an ad when a specific action had occurred such as a sale or a registration. Back in June of 2006, there were several reports that Google was testing a version of its AdWords product using the CPA model. Not much has been heard since. The CPA model is widely used in the affiliate and lead generation industries, but don’t hold your breath waiting for wholesale adoption by the search engines.

This isn’t likely. Affiliate programs have their own problems:

• Control in the hands of the affiliate owner
• Some affiliate programs have been accused on not paying
• Again, no accountability

Affiliates generally cannot monitor sales to see if they have revenue owed to them and since the affiliate program is controlled by the owner of the product, that puts him in control, giving a one-sided advantage just as in PPC. With CPA, search engines will have to rely on their advertisers being up front and honest about the number of “actions” taken. They aren’t likely to give up control. Google practically rules the Internet. Why would they volunteer to climb off the throne?

4. Pay-Per-Percentage: Put forward by Microsoft as a solution to both click and impression fraud. Below is a quote from a Microsoft research paper:

“In this system, an advertiser picks a keyword, e.g. “cameras” and purchases, perhaps through bidding, a certain percentage of all impressions for that keyword. For instance, an advertiser might pay $1.00 to MSN Search. In return, the advertiser might receive 10% of all impressions for “camera” for 1 week. What does this mean? It means that for 1 week, one out of ten times that someone searches for the word “camera”, they will see the ad.”

This could be an adequate model is advertisers could somehow track the number of times their ad actually appears. Again, there is a problem with tracking. With all the models, the accountability question is answered in the ability to track the ads. That’s the missing piece and until it is adequately answered, online advertising will always be a problem.

Bits and pieces of this post were excerpted from SiteProNews. The author of those excerpts is Mel Strocen, CEO of the Jayde Online Network, which owns SiteProNews.

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