Why CPA Should Replace PPC Programs - A Numbers Game
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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.
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