A major article in Wednesday's Wall Street Journal is suggesting that advertisers are beginning to balk at the rapidly escalating costs for keywords. The article cites examples such as "mortgage," which now goes for $7-11 per click, and "mesothelioma," a form of cancer caused by asbestos, which goes for $49. It also notes that eBay, one of the largest purchasers of keywords, is publicly complaining about high price levels. The article suggests that high prices, combined with growing awareness of click fraud, and the presence of middlemen, could cause a backlash that would curb the rapid growth of paid search revenue.

As Executive Editor Staci Kramer of PaidContent.org astutely notes, "The real lesson here: nascent also equals unpredictable, and overreaction in any direction can -- and will -- do damage." But marketing sloppiness exhibited by many keyword marketers is taking its toll as well. Increasingly in a product search, I'll find an eBay ad saying it's got what I'm looking for. When I click through to eBay, I frequently get the message "no items found matching your search term." Perhaps eBay thinks it is clever marketing to have dragged me to its site. My reaction, however, is that eBay just wasted my time, and I am sure to be less receptive to its keyword come-ons in the future.

It's not just eBay; a large number of online retailers seem to be buying keywords for products they don't sell, and brands they don't carry. The marketing objective appears to be to get me to their sites, even if under false pretenses. This game of traffic for traffic's sake turns the Web from a precision marketing tool into a mass medium. Run enough eyeballs past your site, and some of them will buy.

The paid search industry is beginning to realize just how crudely marketers are applying its very refined technology, undermining their real value proposition in the process. That's why they are starting to educate customers and give them tools to use keyword marketing correctly and productively. Credit FindWhat for helping lead the way by offering technology that shows how well clicks on ads convert to sales. FindWhat CEO Craig Pisaris-Henderson, who will be a keynote speaker at InfoCommerce 2005, believes better understanding of returns will ultimately encourage more spending on searches, but in a less speculative fashion. In a bold move to improve not only click analytics, but the overall quality of clicks, FindWhat removed a large number of marginal Web sites from its network a few months ago, making a big bet that as keyword marketers get smarter, the marketplace will reward those who can deliver higher quality clicks.

Step back a bit, and it's not hard to see that paid search marketing is going through an initial growth phase, complete with a gold rush mentality, lots of misinformation, and lots of money being wasted. But there are now signs that this phase is coming to an end, to be replaced by a new phase where savvier, more educated marketers will start using the technology in a much more sophisticated way. This will present new challenges for the big search engines, and create lots of lucrative opportunities for online publishers.