Why Pay-Per-Click Works
We just received the invitation to participate in the class action Pay-Per-Click suit against Yahoo. The ignorance demonstrated in the suit was mildly disturbing. While I wholeheartedly agree that Pay-Per-Click channels need to monitor for click fraud, I'd like to make two points:
1) For advertisers that closely monitor their campaigns, click fraud should be self-corrected through changes in bid amounts. As non-converting clicks increase, simply lower your bid! Of course, this forces you to actually monitor your campaign, but whose fault is it if you do not do this?
2) The problem of click fraud pales in comparison to the exaggerations that have become the norm in the rest of the ad world.
Most forms of advertising are priced based on "impressions". This could be the number of estimated TV viewers, magazine readers, event attendees, radio listeners, website visitors, drivers that pass by a bulletin board...you name it. The key word here is "estimated." Each of the estimates are extremely difficult to make. For example, 100,000 people may subscribe to a magazine, but how many actually read it? How many of these read it cover to cover? How many actually see your ad? Forget actually interacting with it, how many simply see it?
And how easy is it to overestimate any of these? Extremely. In fact, every ad channel that I am aware of doesn't so much as raise these questions. They provide the largest number that they can. This is the norm and advertisers simply deal with it.
So for the traditional advertising channels that are priced based on impressions, it is the advertiser that bears all of the risk - the risk that the ad may be irrelevant or go unnoticed by the target audience.
Pay-Per-Click transfers much of this risk from the advertiser to the channel by allowing advertisers to only pay for those who actually "interact" with the ad by clicking on it.
This certainly leaves some risk left for the advertisers, since not every click converts to a paying customer, but it decreases it to the point where it becomes much more manageable. It is very easy to monitor the performance of clicks, track the percentage that convert to leads/sales and then calculate the value of the click - which incidentally will differ across companies and the different price points of their products.
And unlike many impression-based ad channels which require a heavy investment over a relatively long period of time, Pay-Per-Click campaigns can be judged on a very low budget and in a very short amount of time. Simply track your results, perform testing and do the math.
So as a Pay-Per-Click advertiser myself, I happily take all those non-performing clicks because my performing clicks more than make up for them. And I can say that with much more confidence than I have with our traditional ad campaigns.
1) For advertisers that closely monitor their campaigns, click fraud should be self-corrected through changes in bid amounts. As non-converting clicks increase, simply lower your bid! Of course, this forces you to actually monitor your campaign, but whose fault is it if you do not do this?
2) The problem of click fraud pales in comparison to the exaggerations that have become the norm in the rest of the ad world.
Most forms of advertising are priced based on "impressions". This could be the number of estimated TV viewers, magazine readers, event attendees, radio listeners, website visitors, drivers that pass by a bulletin board...you name it. The key word here is "estimated." Each of the estimates are extremely difficult to make. For example, 100,000 people may subscribe to a magazine, but how many actually read it? How many of these read it cover to cover? How many actually see your ad? Forget actually interacting with it, how many simply see it?
And how easy is it to overestimate any of these? Extremely. In fact, every ad channel that I am aware of doesn't so much as raise these questions. They provide the largest number that they can. This is the norm and advertisers simply deal with it.
So for the traditional advertising channels that are priced based on impressions, it is the advertiser that bears all of the risk - the risk that the ad may be irrelevant or go unnoticed by the target audience.
Pay-Per-Click transfers much of this risk from the advertiser to the channel by allowing advertisers to only pay for those who actually "interact" with the ad by clicking on it.
This certainly leaves some risk left for the advertisers, since not every click converts to a paying customer, but it decreases it to the point where it becomes much more manageable. It is very easy to monitor the performance of clicks, track the percentage that convert to leads/sales and then calculate the value of the click - which incidentally will differ across companies and the different price points of their products.
And unlike many impression-based ad channels which require a heavy investment over a relatively long period of time, Pay-Per-Click campaigns can be judged on a very low budget and in a very short amount of time. Simply track your results, perform testing and do the math.
So as a Pay-Per-Click advertiser myself, I happily take all those non-performing clicks because my performing clicks more than make up for them. And I can say that with much more confidence than I have with our traditional ad campaigns.
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