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A perfect storm for pay-per-click?

Market-Vantage's Hans Riemer finds that while pay-per-click may be the current rage, there's also a threat lurking on the horizon.

In Sebastian Junger's book "A Perfect Storm," three storm systems combine to create a deadly situation for the crew of the fishing vessel Andrea Gail.

Each of these meteorological events would have been difficult alone, but in Junger's narrative, all three combine to cause extreme mayhem in the North Atlantic.

Such is the scenario that's beginning to emerge in the world of pay-per-click (PPC) advertising. While the result may not be entirely lethal, it could be a marketing deathblow to those dependent on Internet promotion.

In Storm 1, the turbulence is relatively mild. Bid prices (and hence the cost per click) are going up, but this can be explained by the rising awareness of PPC's potential effectiveness.

It seems that ad click traffic is continuing to grow, but fewer visitors are clicking through.
Likewise, Storm 2 looks typical enough. Search properties like Google are increasingly using affiliate sites to serve up more ads than they could on just their own search sites in order to extend their reach. So far, there's nothing to get terribly excited about.

But when you toss in Storm 3, the brew gets a bit headier. It seems that ad click traffic is continuing to grow, but fewer visitors are clicking through to either take some kind of meaningful action or actually transact business. In other words, clicks are increasing, but conversion percentages are declining.

At first glance, the anomaly seems to be tolerable, much as the turbulence in Junger's North Atlantic initially appeared. However, further investigation reveals a subversive undercurrent in the form of PPC affiliates employing "pay to click" personnel to artificially bolster PPC hits, and ultimately, revenue.

Needless to say, that's certainly not the way it's supposed to work, and it appears that the latest round of search engine affiliate programs may be to blame.

Overture Services has made its living by providing the technology that underpins the PPC ads on such giant sites as parent company Yahoo, MSN Search, InfoSpace and AltaVista. Google's more recent AdSense program is designed to one-up Overture by covering a broader spectrum. AdSense affiliates the owners of high-traffic Web sites, including many that you probably have never heard of.

At first glance, everyone wins. The PPC providers get more exposure and more revenue, the Web site owners get a percentage of the cost per click, and the advertisers get more eyeballs and, presumably, more traffic.

But recently, there's been a growing crop of Web ads and low-level spam offerings targeted at recruiting people to surf the Web and click on ads, using their own computer and an Internet connection.

Whenever a new medium is introduced, there are invariably people who seek to circumvent its conventions and subvert its intent for short-term gain.
With just a small coterie of such people using a variety of individual Internet Protocol addresses, it is almost impossible to determine which hits are real and which are "paid to play."

Admittedly, there is no direct evidence linking Google to such practices, but those disturbing spam ads are still out there, threatening to undermine the PPC environment and ultimately, if the storm becomes big enough, the future existence of PPC advertising.

Unfortunately, it seems that whenever a new medium is introduced, there are invariably people who seek to circumvent its conventions and subvert its intent for short-term gain. One only has to think of the payola scandals in the early days of rock 'n' roll or the floods of current e-mail offers for body part enlargements and shady refinancing deals.

Of course, self-policing is the first line of defense, and obviously, some affiliates are more reputable than others. Likewise, some PPC vendors are more circumspect about choosing their affiliates than others. But as we've seen with the enormous proliferation of music online, once certain floodgates are opened, they cannot easily be closed again. As with the Andrea Gail at the end of its journey, the realization only belatedly dawned on the sailors that the storm that had been willing to let them in would no longer let them out.

We do not want to get to that point with PPC. It is a very effective medium to advertisers and, in an Internet advertising environment known for annoying banner advertising and pop-ups, a welcome source of promotional relief.

There are precious few fish to be harvested from today's troubled economic waters, and it would be a shame to see another medium sink in the swirl of uncontrolled controversy. But, left unchecked, advertisers will, at a point, abandon PPC if they lose their trust in the process and begin to feel like victims in waiting. And if that happens, the first to go down will be those too shortsighted and obsessed with immediate gain to play the game fairly.

Christopher Payne Taylor, a senior partner at Market-Vantage, contributed to this column.