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Op-Ed: Rethinking pay-per-click as big prices hit advertisers

By Paul Wallis     Oct 19, 2012 in Internet
Sydney - Pay per click (PPC) is the staple of Google’s Adwords system. You select some keywords on your ad, and pay when the ad gets clicked. That’s been a big plus for some people, but prices are getting in the way, in a big way.
The New York Times:
While about 96 percent of pay-per-click advertisers spend less than $10,000 a month, according to AdGooroo, a research firm that studies the pay-per-click market, big-budget advertisers spend hundreds of times more. In the first half of 2012, Amazon reportedly spent $54 million, and the University of Phoenix $37.9 million. “AdWords can bleed many a small business dry,” said Sharon Geltner, an analyst at the Small Business Development Center at Palm Beach State College in Boca Raton, Fla.
This is a cashflow thing, and it’s a hell of an expensive hobby for small businesses. Yes, advertising like this does generate more business, and often a lot more business, as well as many more enquiries, but it’s not like every click turns into a sale. The overall rate of PPC sales is a percentage of clicks, and the net cost for smaller businesses is a bottom line issue.
Market wisdom is that there’s a point at which it’s just not worth it. This is an area where the net has been slow to pick up on viability issues. Big media has been bitching about online ad revenue for years. They run these ads, and don’t see much in terms of revenue for them. Even Facebook, which is to some extent ad-dependent, has been slow in terms of building a revenue base which isn’t ad-based, and the market is now griping about it.
Internet advertising, for all its hype, is basically pretty primitive in some ways and unnecessarily complex and unreliable in the eyes of some advertising professionals. Advertisers on websites get paid “per milliard”, which is a rate calculated on 1000 hits on an ad. This value can vary, a lot, and neither site owners nor advertisers can be entirely sure what’s going to happen, either way.
The fact is that no business can afford an open-ended advertising campaign, even if it is bringing in business. It doesn’t make a lot of sense to simply give an advertiser a blank check and hope for the best, either. Ads have to translate into cost-effective sales for advertisers and decent revenue for the people advertising on their sites. Site owners, who may put in ungodly amounts of time and effort into their sites, do need to see worthwhile returns.
There’s another side to this which does make more sense. “Organic searching” results. Marketing value. These are hits generated through targeted blogs and websites. They’re naturally within the interest of consumers. People click on a site and see targeted ads, too. Pretty basic, but it works. This approach also helps site owners, who can be sure that the ads they’re running are of some value to their users. (Compare this to the usual dating site crap you see running on sites who have no control over their ads. These ads can actually offend and annoy people, but the site owners are stuck with them unless they go through the sometimes tortuous process of editing the types of ads they run. Even then that doesn’t filter out the useless stuff which could be using their space more effectively.)
Organic searching has another benefit for advertisers- It’s unpaid. This is good SEO. This content gives access to the advertisers directly. The basis of organic searching, ironically, is content. People don’t search for ads. They search for information. Users go looking for information and find content, to which ads and backlinks (links back to an advertiser’s site) are attached.
I’ve been doing this type of work for years, creating content for commercial clients which relates to user interests. I was also a major skeptic about old style SEO, which was based on keyword densities (numbers of keywords as a percentile of content word counts) and basically worked as a type of verbal spam. I soon discovered that properly researched SEO does generate a lot of business very cost effectively. In terms of marketing needs, it has the added advantage of being always on target. People can live without visual spam online, and it shows.
What about the sites and blogs, though? Blogs are hard work. To get ads paying for themselves on a blog isn’t easy. Every site owner knows the story. A site staggers along, trying to pay for itself. Promoting a site is like promoting a bullet in the brain in terms of costs, even when you’ve got good products and a lot of ideas.
The current form of advertising simply doesn’t have enough options.
For sites, there has to be something better than “You will be advertising mangy classified-like things selling God knows what, regardless of their value to your site”.
For advertisers, there must be something a bit more appealing than “You will be paying any old number of dollars that looks nice”, particularly when organic searches will drum more hits.
There are other holes in this bucket, like better options. The NYT, for example, runs a range of rates for ads on set values. It couldn’t really get a lot simpler to run any kind of ad. Consider the value of a single NYT ad in terms of accessing target demographics, and compare it to the scattergun approach of PPC.
The process for something like a book, for example, is idiot-proof:
NYT > Books > Ads > click through to sales.
The New York Times charges set rates for its ads. Given the size and scope of The New York Times, the targeting is pretty easy and the rates are relatively a lot cheaper. The joke is that a basic NYT ad is probably worth a lot more to advertisers than PPC will ever be. The site itself is a natural hub. Why? Because the information content is so strong.
This, ironically, more or less proves the value of organic searching and SEO, which is based on fundamental advertising principles. People gravitate to places where they know a lot of information is available. The expectation of finding the information they need is much higher. Ads are more credible and by far more relevant.
PPC needs to get down to basics and show values that reflect realities. Organic searching can trash PPC quite effectively. The current PPC model can’t comfortably manage a simultaneous increase in payouts to sites/Adwords clients and reduction in costs to advertisers.
The answer is going to be a compromise, but it has to be a productive compromise, generating more business for PPC operators. Google might want to start looking at organics as the better option for PPC values, too. Strange to think that the world’s largest search engine is actually missing out on its own core business, but there it is. Hopefully, things will improve before there’s a stampede out of PPC into safer and cheaper ad options.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of
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