Is it Time for a New Search Advertising Model?

The pay-per-click advertising model has been around since 1998. In those nine years a number of unsavory characters have attempted – some very successfully – to make money from the model while hurting innocent people. This article looks at some of the harmful effects of PPC, and wonders if there is something better on the horizon.

The most obvious evil to come out of pay-per-click advertising is click fraud. For those of you just coming to the table, click fraud happens when an advertiser’s ad is clicked by someone with no intention of following through with a purchase or other action, often repeatedly. Since the advertisers are paying by the click, click fraud can quickly cost an advertiser a ton of money with nothing to show for it.

We’ve covered click fraud in a number of articles here on SEO Chat; most recently, we looked at botnets getting into the game. While some estimate that one in every five clicks on ads can be attributed to click fraud, Google has said that it makes up less than ten percent of clicks on pay-per-click advertising. Unfortunately, it’s hard to know who to believe, since the search engines and the industry in general disagree on what kind of clicks can be considered click fraud. After all, users can click on an ad legitimately and then choose not to do anything when they see the landing page.

The problem is that pay-per-click advertising almost invites click fraud. Everyone knows that advertisers are paying by the click. So if Company A, a rival to Company B, wants to cost Company B a lot of money, then Company A can just click repeatedly on Company B’s ads. Company A thus forces Company B to use up its resources a lot more quickly – and all it needs to spend is a little time and effort. Competition is supposed to be a lot cleaner than that; whatever happened to making the better product or having better relations with your customers?

That’s not the only version of click fraud by a long shot. You may have heard of “made for AdSense” sites. AdSense is the publisher’s side of Google’s search advertising machinery. The way it works is that owners of content-based web sites sign up for AdSense in order to allow Google to run text ads on their sites. They then get a cut of the money when visitors click on the ads. Well, a number of those content-based sites were specifically created to host those ads – and then the owners either click on the ads themselves to get a little extra income, or invite all their friends to do so. This is a direct violation of Google’s Terms of Service, but that doesn’t deter the fraudsters.

{mospagebreak title=The Bad Flavor of Domain Tasting}

I’ve covered the topic of domain tasting more extensively in a different SEO Chat article. These are the kinds of sites that many people think of most when the topic of click fraud or search engine advertising abuse comes up. While domain tasting was more or less made possible by the International Association for Assigned Names and Numbers, and VeriSign, it’s click fraud that helps to fuel it and make it popular.

Modern domain tasting works something like this: entrepreneurs purchase a whole slew of domain names from VeriSign. They then load up the domain with pay-per-click ads from Google or Yahoo, and maybe use a scraper bot to add something resembling content. Once the "site" is created, they monitor it to see how much money comes in over the next few days. If more than enough comes in to pay the registration fee, they keep it. But if they don’t get that much money in five days, they return the domain name to VeriSign and get a full refund.

Considering that VeriSign charges only $6 per year per domain name, it doesn’t take much traffic or very many click-throughs before the sites pay for themselves. Many of the domain names are typos of trademarks. That’s partly because some of the big-time domain tasters monitor the searches that are typed into Google and other major search engines (just think of the Google Zeitgeist, which lists the top 10 searches in Google every week). Web surfers often search for information on “Nike sneakers” or “Apple computers” or other items produced by high-profile companies, and they don’t always spell very well. While Google’s “Did you mean?” feature helps set many of them on the right path, it doesn’t change what was originally typed into the search engine.

So other web surfers type in what they’re looking for, either in the search engine or sometimes in the address bar, and they wind up at a web site that has nothing to do with what they’re really looking for. They might even click on ads on the site in the belief that it will take them where they’re trying to go – and every one of those clicks is paid for by some advertiser. Some of the owners of these domain tasting, made-for-AdSense sites even suggest that they’re doing a service for the trademarks they typo, saying that such companies can always take out an ad on their web sites to redirect users – and thus pay the domain taster for every web surfer sent to the right place in this way. Maybe I’m overly sensitive, but I think that takes a lot of nerve – and if search engine advertising wasn’t so easy and profitable for these MFAs, we’d probably see less of this kind of thing.

{mospagebreak title=PPC Pays for Spyware, Adware}

Lots of people hate click fraud, domain tasting, and MFAs. I don’t know anybody who likes spyware or adware either (or at least, nobody who will admit to liking it in public). But strangely enough, the PPC advertising model also supports the makers of this reprehensible software. I wrote on the Google connection to spyware back in 2005. Harvard law student and spyware researcher Ben Edelman discovered a very tangled web in this area that left egg on the face of many companies, most notably Google.

Basically, what happens is that respectable companies go to advertising firms for ad placement; they also want search advertising. These advertising firms, in turn, go to intermediaries that already have something set up with Google. There might even be another link in the chain. However it works, what eventually happens is that some sites download spyware or adware onto the computers of web surfers, often without their knowledge or consent (sometimes piggybacked onto other downloads to which they did consent). The spyware then pops up to display ads whenever the web surfer visits certain other sites. For example, 180solutions at one time popped up ads for Expedia whenever the computer it had infected with spyware visited the American Airlines web site.

While not all of the ads that the makers of spyware and adware showed were from Google, a surprising percentage of them were in fact Google AdSense ads. If you follow the path of the money, then, this meant that Google was indirectly supporting these people. Worse, advertisers were unwittingly using a form of advertising that they probably never would have condoned had they known about it in advance. It can be difficult to erase the stigma of having been seen as an adware or spyware advertiser; no one wants that kind of bad publicity.

Think the issue has gone away by now? Think again. In May 2006, Yahoo faced a lawsuit over a similar issue. The plaintiffs claimed that Yahoo was showing their ads “in ways that contravene defendants’ contracts with its advertising customers.”

Ben Edelman weighed in on the side of the plaintiffs. “I now have many dozens of different examples of Yahoo pay-per-click ads shown with spyware,” he said. Worse, in some cases, “spyware completely fakes a click – causing Yahoo to charge an advertiser a ‘pay-per-click’ fee, even though no user actually clicked on any pay-per-click link. This is ‘click fraud.’”

{mospagebreak title=What Will Replace Pay-Per-Click?}

Click fraud, domain tasting, spyware, adware, made-for-AdSense web sites – all of this is powered by how easy it is for publishers to make money off of the current pay-per-click search engine advertising model. There’s nothing wrong with making money, of course, but in this case it is at the cost of someone else. Advertisers and site owners who pay for PPC ads are not getting what they paid for.

I admit that I am not a big fan of advertising (though it does pay the bills for us). But no one who has entered into a business deal in good faith deserves to be cheated. The search engines do not intentionally cheat their advertisers, but it seems clear that they’re having some difficulty policing the members of their content networks. When a system is this open to abuse, one has to ask whether it’s time for a change.

You’ll find several articles on SEO Chat that mention pay-per-action. It’s an advertising model that is being promoted by Bill Gross, the same person who came up with the original pay-per-click idea. With pay-per-action, the advertiser doesn’t pay every time someone clicks on his ad; rather, he pays when someone completes a specific prescribed action after clicking on his ad (buys a product, subscribes to a newsletter, explores a page on a web site – there are plenty of possibilities). While we mentioned it as early as August of 2005, pay-per-action hasn’t picked up a lot of traction yet, possibly because it isn’t as profitable for publishers as pay-per-click.

We might still see pay-per-action take root. Or someone might come up with a hybrid between pay-per-click and pay-per-action, where the advertiser pays a minimal amount of money for the initial click through and more if/when the web surfer takes the desired action. Someone might even come up with an entirely new and different search engine advertising model. But however you look at it, the problems with the pay-per-click advertising model aren’t going away any time soon.

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