It's been an interesting week in the world of pay-per-click. First there was the big New York Times article on click fraud, which gently concluded that the search engines will ultimately extinguish it, so paid search marketers can rest easy. Then, click fraud was the topic of a lively session at the huge Search Engine Strategies conference, where nobody seemed to think that the problem of click fraud would disappear anytime soon.
There also was the article in Business Week suggesting Google might just be a "one trick pony" given its near-total focus on paid search advertising. For good measure I'd throw in the announcement by the snap.com search engine that it is rolling out a "cost per action" advertising program that allows advertisers to tie payment to specific activities, such as downloading a white paper, registering or making a purchase. Keep in mind that while snap.com may be a small player, it's an Idealab company, and they're the people who invented paid search in the first place with a little company that later became Overture.
All this market discordance says to me that we're on the verge of a new generation of pay-per-click business models and tools that will reflect a better understanding by all parties as to what pay-per-click can and cannot deliver.
It's been my view that the phenomenal growth of pay-per-click has been fueled by hype and misunderstanding. Advertisers embraced pay-per-click because of its compelling COD -- cash on delivery -- premise which offered guaranteed results. Is it any surprise that advertisers flocked to it?
Despite their loose use of terminology, paid-per-click providers aren't really in the pay-per-performance business, at least as advertisers define it. These providers are selling traffic to their advertisers, with absolutely no guarantee that this traffic will turn into sales leads, purchases, or anything else for that matter. Stated another way, these providers are delivering what those in other media call advertising impressions, they just charge for them differently.
My sense of the market is that advertisers, sensitized by such issues as click fraud, are rapidly coming to realize that they've been buying impressions, not performance, and are now starting to demand real pay-for-performance that ties payment to specific, measurable and largely fraud-proof actions. Ultimately, what advertisers want, they get.
It's too early to say if this shift will be good news or bad news for data publishers, but it seems likely that this new clarity on the part of advertisers will work to level a playing field that had tilted much too far in favor of the search engines. Finally, everyone will truly get what they paid for, and that is a good thing.