Some Consequences of Pay-Per-Click’s Growing Pains
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Pay-per-click advertising has grown up, but what sort of creature is it now? Some savvy people have come up with ways to game the system in order to line their own pockets; at least one of these ways (click fraud) hurts those who use the system correctly. Is it time for a new online advertising model? What does the future hold?
When pay-per-click advertising first got its start nearly a decade ago, some Web surfers reacted with shocked outrage and betrayal. How dare search engines accept money from businesses in exchange for placing their websites in prominent positions when searchers used particular keywords?! Others simply figured the scheme wouldn’t work. What business would pay that kind of money for such a small advertising blurb that didn’t even sit there all the time, in contrast to a banner ad? But GoTo.com, later renamed Overture and now owned by Yahoo!, proved the scoffers wrong. Pay-per-click advertising has grown big, and we’re all suffering from its growing pains.
By now, everyone knows how pay-per-click advertising works. Advertisers bid on keywords, stating the amount of money they’re willing to pay every time someone clicks on their ad, which pops up when a search engine user performs a search on a particular keyword. How much they bid, in comparison to the other bidders for that keyword, helps to determine what position their ad receives (and presumably how likely it is that a user will see their ad and click on it). That in itself would be fine, if there weren’t ways to game the system.
Click fraud happens whenever users click on a business’ ad with no intention of doing research on or purchasing anything from the company. Usually click fraud is committed either to harm the advertiser directly by causing him to go through his advertising budget too quickly, or to increase the amount of money an affiliate website gains from hosting ads that are part of a pay-per-click advertising campaign. Reputable industry analysts estimate that click fraud runs as high as 20 percent for certain keywords.
That’s not a typo. You do the math. By this estimate, for every five dollars you spend on pay-per-click advertising, you effectively throw one away. Is there a solution, short of taking it to the courts, as Click Defense chose to do with Google? Snap.com seems to think so – which is interesting, since the force behind them is the same man who started pay-per-click advertising in the first place.
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