Why CPA Should Replace PPC Programs

Pay per click has been much more successful for online advertising than the methods that came before it. But it is not without its problems. Keep reading to find out what is going to replace it, and why.

PPC (pay per click) has changed the way advertising is done on the net; I dare say, it has changed the Internet itself. It has changed how websites view themselves and the way they view traffic to their sites. It used to be that would-be online entrepreneurs would just build sites and get web surfers to view them, then make money by selling services or products.

Now, with the advent of pay per click programs, every web publisher views his or her site as an opportunity to become a six figure earner. The search engines see it as their opportunity to make billions, everybody is making money, and everybody is happy. So how can I dare to suggest that PPC should go away and be replace by CPA (cost per action)?

The Success of Pay Per Click

Pay per click is the kind of package that Google offers via its AdSense program, and Yahoo offers through its Sitematch program. It simply means that the advertiser pays a particular amount of money every time his or her link is clicked on. Most PPC programs are based on context, which means that if a web site registers to be part of the search engine’s PPC program, the search engine’s crawler scans each page of the website and assigns relevant adverts (using simple text links), all in a very unobtrusive manner. Once a user visiting a web site in the program clicks on one of the links, the automated system calculates how much is due to the website owner, how much is due to the search engine, and how much the advertiser is going to pay.

Other programs are based on the SERPs; the position of an advertiser’s ad is based on how high he bids for particular keywords in comparison to others bidding for the same words. These ads may then be listed as sponsored links in particular key word searches. Some search engines, such as Google, place the link for the ad with the most click throughs on top of their sponsored ad listings, in an effort to still offer the most relevant listings to search queries.

The contextual pay per click program may be the single most revolutionary thing to have happened on the Internet, and one of the most wildly successful. This is because it keeps online advertisements unobtrusive to the web surfer. And the browsing audience, like every other audience, despises advertising. Think about the general hatred with which pop-ups and spam emails are viewed. Searchers derive pleasure from finally having control over what they view and what they don’t; this level of control has never been available on any other media before the Internet. AdSense solved millions of head scratching advertisers’ problems: finally there was a way of advertising on the net that worked for more than six months! PPC programs were wildly successful, perhaps too successful.

{mospagebreak title=A Numbers Game}

Advertisers were faced with prices, which when compared with offline prices, are hideously cheap. A 15 second slot for adverts during the Super Bowl would cost millions of dollars; likewise a full page ad in the Economist or Sports Illustrated would cost lots of money. But even Yahoo’s murderous Sitematch program is just a few hundred dollars for the inclusion package, and then a fee between 40 cents to one dollar per click. With the wide appeal of the Internet, online advertising is big business. Millions of users click on links daily, and if the numbers work (which they do), at least ten percent of browsers click on PPC or CPA links on a daily basis.

The Billion Dollar Scams

In the first quarter of this year alone, PricewaterhouseCoopers (PWC) reported that the revenue from online ads came to a record $4 billion. This is from one quarter alone; the last quarter of 2005 saw revenue of $3.5 billion. We are talking about an average of $12 billion from online advertising alone, and you can be sure that it will grow. Search engines and their networks, large doorway websites and email providers generate most of this revenue.

The size of the market and the difficulty of monitoring and policing the net (perhaps Tom Clancy’s Netforce should become a reality) make click fraud a huge reality. Outsell reports that 14.7 percent of all clicks are fraudulent (this was out of 470 web sites surveyed). That gives us a lot of crooked millionaires.

They report that click fraud is worth at least $800 million. This is just the amount that has been discovered to be fraudulent (the money had already being paid out). If my own experience of corruption is valid, for every dollar reported stolen, at least six escaped “sight unseen.” This is a large and scary picture that I am painting, but the scariest part is that it could be true. Imagine it: you have a website, a small goofy one; you get a few hits a day, a few click throughs, not much. You wonder what a hundred click throughs a day could do for you and your family. Maybe you let it go, and maybe you do not.

The Backlash

The numbers are beginning to count for advertisers, as they are beginning to cut back on PPC programs. According to Outsell, advertisers have moved $500 million of their money out of PPC programs. Some advertisers have pulled out of the PPC game altogether. The only reason they would do this is if the results do not justify the expenses. Simply put, PPC does not work any more.

{mospagebreak title=Who Cares?}

So who cares about the advertisers? After all, contextual ads are the rage, and everybody is happy. The advertisers are “where the eyeballs are;” how dare they complain! The search engines get people to see the ads in an unobtrusive manner, real people do click on them, and the site owners make sales. The advertisers shouldn’t be concerned with a few scam clicks. Who is on the advertisers’ side?

The Search Engines

The search engines get paid per click, and they are the medium; do they really care? It seems Eric Schmidt does not care. Google keeps the way it polices for click fraud highly secret — so secret that I wonder whether it polices at all. Lack of transparency makes advertisers view PPC programs with suspicion.

The search engines are making an effort (their credibility is at stake) but it seems like this is the part two of search engines versus web site owners. Like part one, in which the black hats keep Google dancing, the search engines may find that they are one step behind click fraudsters (let’s call them “flicker” specialists). The search engines also run the risk of turning into policing and monitoring agencies, instead of just being in the business of providing relevant SERPs. The motivation exists for them to reduce click fraud, however, so that they do not lose their advertisers.

The Web Site Owners

That’s you and me! Do we care about the advertisers? Actually we do — under certain circumstances. It is only when you are an affiliate, or selling a package for which you get paid only if the other site gets paid, that you consider pre-selling your product. When you get paid per click, the more clicks the better. Your business is that you get paid.

It is when we have to work for our money that we care about the site on the other end of the click through. In that case, you’re trying to get traffic to your site  not because of the ads by Google on your site; it is actually because you want traffic on your site. Only web site spammers build sites just so that the one in ten user can click on an ad (and they certainly do not care about “flickers”).

How CPAs Work

A cost per action ad means that the referrer site only gets paid when an action is performed (I hear the howls already). An action can either mean an actual sale or a lead generated (such as an opt in form filled out). It is also called pay per performance. It eliminates click fraud, as well as another more insidious feature of PPCs.

{mospagebreak title=Cost Benefits to Advertisers}

PPCs do benefit the medium, in this case search engines and web sites. They put advertisers where the eyeballs are; advertisers get clicks, and pay for clicks. As an advertiser, the more clicks you get, the more you pay. But search engines and publisher web sites do not care with PPC if you make a single sale (that is your business). With pay per action, your health is their health, and you discourage automated websites that do nothing except serve as glorified doorways.

And no longer will Yahoo threaten small websites with small SEO budgets by way of their infamous “pay for inclusion/pay per click” packages. Now small web sites can competitively get the same key word and advert positioning as big businesses. With CPAs, advertisers will be able to get unparalleled exposure at a fraction of the cost. This will also reduce business websites’ overall dependence on SERPs.

Increased email marketing is a feature for which the businesses that focus on pay per action will have to prepare. In order to generate leads, their referrer sites pre-sell visitors, and their services.

So how will all this benefit the search engines, or the publisher web sites?

Higher Prices

The laborer is worthy of his/her wages. If the search engines and the web sites are going to do more work, then they should be richly rewarded. Rental fees for each lead generated on a quarterly or a yearly basis may be required. If the action required is a sale, then a percentage of the sale instead of a fixed price could be standard.

The publisher web sites will have to actually provide some content; I have seen some sites that just have links and ads by Google.

PPCs are successful, but there must be a better way. CPAs enable effective advertising with less policing, and maybe, more money all around.

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