Some Consequences of Pay-Per-Click’s Growing Pains - Bill Gross’ Next Great Venture
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Bill Gross was the pioneer behind GoTo.com’s “pay-per-click” advertising model. Yahoo! purchased the company in 2003, one year after search engine giant Google introduced AdWords, its own pay-per-click advertising service. One could say that this makes Bill Gross indirectly the cause of click fraud – in the same way that Thomas Edison is indirectly the cause of all the neon-lit advertising in Times Square. Gross, described by the Associated Press as a “serial entrepreneur,” believes he has an answer to click fraud. It’s so simple that a lot of people must be slapping their heads because they didn’t think of it first.
With Bill Gross’ new advertising model, instead of paying a cost-per-click, advertisers shell out a cost-per-action (CPA). Business owners do not pay every time a user clicks through from an ad to their website. Rather, they pay when the searcher completes a desired action, such as makes a purchase, fills out a form, performs a download, and so on. In this way, advertisers only pay for concrete results.
Best of all, the model eliminates click fraud. Remember, click fraud occurs when someone visits an advertiser’s website with no intention of doing anything, for underhanded financial purposes. Since the advertiser is no longer paying for those clicks, click fraud (at least as it is currently defined) can’t happen.
Gross is launching this new advertising model from Snap.com, which describes itself as “a next-generation search engine for broadband users.” Launched in October 2004, it has received some good press. It is not likely to topple Google any time soon, however. In the nine months or so since its launch, Snap processed about 16.4 million search requests. Compare that with Google, which processed 1.8 billion searches in a single month – and that only counts the searches originating in the U.S.
Snap.com has some other interesting technology going for it. It combines algorithmic search results with human click stream data. Snap calls this “behavioral ranking.” The idea is that sites at which people have received more value will rank higher in the results than other sites. Value can be measured in the form of good content (presumably gauged by users spending more time at the site) or completed transactions. In this way, it bears some similarity to Yahoo’s recent My Web 2.0 initiative, the difference being that it directly measures user behavior rather than simply letting users tag and share sites they found useful.
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