Search engines are all about pay per click these days.  It’s part of the revolution that happened with Google’s add-money advent of adwords.  But since Google launched its pay per click model, other search companies have followed suit.

The idea of course is simple – allow advertisers to pay only for visitors that click through their ads.  I (me as a service and goods provider) decide how much I will pay for a click, and then Google determines the placement of my ad to maximize their profit – clickthrough percentage times clickthrough revenue.

For me the advertiser it seems I’m getting a good deal, but no…. that’s not the case.  It just offloads the job of me calculating the clickthrough rate myself and saves me from having to figure out what I’m willing to pay per impression on the front end.  But I still have to figure out how much of my revenue per visitor I’m willing to set aside.

There are problems with pay-per-click, and no actual advantages, for me the advertiser.  But still there are few effective alternatives for businesses who primarily sell via the ‘net.

The two most serious problems are:

  • Click fraud. I can’t tell if a click through my ad and a visit to my site is from a visitor that’s interested in what I’m offering, or not.  Google and other engines try to put technology in to minimize click fraud, but even so, when someone clicks on my ad, it costs me money no matter what.
  • Uncertain impression cost. How much do I have to pay for an impression?  In advertising, name recognition is everything.  With the PPC system I can’t figure out how much an impression costs because impressions are not something I pay for.  But impressions very much matter.
  • Skewed ad placement. It’s possible for others, or competitors, to push my ads off the search results just by clicking on them, particularly if I limit my daily spending on ads a lot.

To illustrate the problem, just to be contrary, I always type in the name of sites directly into my URL for sites I find I’m interested in, because I don’t want the company I’m buying from to have to give money to Google and raise my costs as a consumer.

Think about this: By not clicking on the ad in Google, you are reducing the cost of goods that you, the consumer, pays.

Additionally, I always click on the Google ads of companies I don’t like.

Think about this: By clicking on ads in Google, you can cause money to be transferred from the company to Google even if you could care less about actually using their goods or services.

Google and other search engines could, very easily, provide me with click through statistics even if I purchase impressions.  And if I use the same adwords tool to track the conversion rate, I’m still guaranteed to know what a click is worth in terms of revenue for me.

But there are advantages to purchasing impressions:

  • It doesn’t matter how many times anyone clicks on it, so paying for impressions is immune to click fraud. Google and other SEOs can very easily avoid counting repeat quick impressions by the same user.  If a user refreshes their search page 100 times in an hour, search providers can trivially count this as one user impression.
  • I get to decide how much it’s worth to me to get my name out in front of a potential customer who searches for a related key word, and
  • I get to see my relative impression placement against people I might be bidding against for placement.

It’s not even difficult for search providers to calculate my clickthrough rate, and with integration of site stats, my conversion rate and return on investment.  That could easily give me a Pay-Per-Impression model that would work well.

Think about this:  There’s no way for people (like me above) to skew ad presentation or cause transfer of money for uninterested visitors.

I pick on Google most of all because it invented this insidious advertising model to start with, but every other search provider does it pretty much the same way.  So tell me then…. why do we even have Pay-per-click in our marketplace then? I’d sure like to know, and I’d sure very much love to see it go away.

Nov. 24 – Update with an example: It’s certainly possible for impression-fraud to happen the same way click-fraud does, with bots all over the internet querying for search terms to generate an impression of my ad.  But it would require more work, as in many many more hits. That’s because impressions are worth so much less than clicks.  One of my ads has a clickthrough rate of 0.2 % and costs 50 cents per click.  A click fraud operation could exhaust my $20 per day budget in just 40 clicks.  But with the click through rate established, the cost per impression is 1 cent.  So a click fraud operation would have to generate 2000 impressions.  That’s harder to do undetected because it requires 2000 computers instead of 40.  Google would still make the same amount of money if I were bidding 1 cent per impression as if I were bidding 50 cents per click because Google’s already collected stats on my click through rate and that rate is fairly constant over time for my ad.