Reading the Google hit piece appearing in Barron's this week made me think of all the pay per click model. Pay per click (PPC) has been around for over a decade, and while Google has made some positive changes in him, is showing its age.

If you think in the process of Internet advertising as a series of actions, it would be something like:

Print -> Click - Action>

Back in the old days, the metric is CPM (cost per thousand), and advertisers pay per impression (which gets your ad on the screen.) CPM for the editorial on the advertiser, and the responsibility of the publishing ended in the first part of the process. DoubleClick, an advertising company to serve early, came up with DART system for matching the right advertiser to the right screen to maximize the return from the PRC.

PPC metrics moved forward in the process, measuring the success (and payment) is not based on the number of times the ad was served, but how many times have you actually clicked. When most people think of Adsense PPC to think, the engine of Google's contextual advertising. But PPC is used in banner advertising on large farms and other advertising companies like Doubleclick, and some affiliate programs, although the number seems to be decreasing.

The latest incarnation of search engine based on PPC (thanks to Google), it works: you select keywords you think people will use to search for things related to what you sell. For example, if you sell the pretzel dough you might want to advertise on pretzels or crackers to make or something. Keyword selection is way beyond the scope of this article, but there are plenty of companies out there who make their living by helping to choose the keywords. Anyway, then bid on keywords and your ad is displayed on the page with search results.

With Google Adsense moved the context of search engine results page to your web site content. He says his site and decide what words to use to show ads on your site, as you would a Google search.

For affiliate programs is a little different, but the concept is the same. You choose the ads (or pay someone a piece of the action to choose the ads for you), and get displayed on your pages. Instead of selecting keywords explicitly, you are selecting ads based on what you (or your agent) thinks that people who have chosen to read its contents may have an interest in seeing.

When someone clicks on your ad, you get paid. It's that simple.

For Adsense, which appears first on the list makes all the difference. One study suggests it is the # 1 raises the possibility that options have been pressed up to 40% because many people do not look beyond the first (I always check first). The difference in rates between the first and second position could be staggering. For example, 1,900 people have been searched on Google for the tax on the word yesterday. The first place Adsense would have cost you $ 25.12. Positions 2 and 3 down to $ 6.96, and 4 and 5 would have cost you $ 4.24.

My experience with Adsense tells me that in this case the first position, probably Google would pay about $ 10.

As a publisher, this is a home run. Each time the person clicks I can get a $ 5 bill. God, what a country!

And when the poster, $ 10 for the person at the door seems like a lot of money for me. If I am selling a high margin item (such as tax software or one of those quickie tax credits), it seems that might be okay.

But I have yet to get them to buy. Conversion rates (to get the person to take any action once you have clicked on the ad and gone to their site) vary greatly, but I always use 1.5-3% of people who click on an ad . This means that 97 to 98.5% of people who click the ad is not purchased. We will use 2% as an example. That means that for every five bills that fly in the pocket of the publisher, only about 2 people in every hundred will buy anything. So for every $ 1000 that I happened to get 20 sales. This means that each sale costs me $ 50. Your results may vary, of course, depending on how targeted your keywords and your industry and supply. Get the conversion of up to 5%, for example, and was reduced to $ 20 per sale, which is a little better. I am designing a "what-if tool to help with this, and I will post when ready.

One reason for the low conversion is probably click fraud. If an unscrupulous person wants to make money on PPC, all you need do is find a group of people (or teams) to click on ads on your site continuously, and you will reap the rewards.

Barron's believes that the smart money is coming from the PPC. FTD cite as an example:

Giant Flower FTD Group (FTD) recently complained about the high price of search advertising. "During the Christmas season, some costs online search engine increased significantly over the previous year, and as such, we decided not to proceed with the volume that is so expensive," said Michael Soenen, chief executive.

First, let me say that as an advertising executive who launched FTD, and I do not seem the brightest lights in the chandelier. That said, it's easy to see why you want FTD out. Being # 1 or # 2 in the keyword flowers around Valentine's Day would have cost between $ 6.25 and $ 10.00. There were 100,000 searches in the days near RV in that keyword, and 11,500 in Flowers Delivered, it would cost between $ 5.03 and $ 6.72.

Some simple arithmetic shows me that FTD networks around $ 6. 20 per transaction through its network. So the transaction is either a wash or a loss. FTD is the number one ad in Google for your keywords, so I guess I decided to eat that first operation, with the continuity of saving them. According to Barron's is not going to work well:

One industry executive noted that the value of the life of a customer acquired through Google for his business had approached zero. Oops. So much for that theory.

So the answer seems to be the big ones are coming out. Using the example of the flowers, however, the first 5 ads FTD, ProFlowers, Hallmark, 1-800-Flowers and Teleflora. So I guess that will happen over time.

Where is the future? According to the inventor of payment by clicking on it, Bill Gross (GoTo before. com), the future is pay-per-action, moving the measure to the end of the operation of Internet advertising, where we believe it belongs. There is an excellent article on Seochat.com which has more information about it.

Pay-per-action is simple ... both parties have a stake in the outcome of the click, either a sale, an advantage, or even a phone call instantly (more on this in Part 2). We believe this will be the next big thing, and it's happening now.