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Joe Chin has been CEO of Guidester, Inc. since co-founding the company, originally known as Decidia, Inc., in early 2000. After leading Decidia through its initial growth as an enterprise business, he repositioned it as a paid search company in 2005 and rebranded it as Guidester, Inc. Since the rebrand, Chin has leveraged his 15 years of Internet and entrepreneurial experience to oversee Guidester's strategic direction and manage its day-to-day operations.

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PPC’s Not DOA: Examining the Strategies of the PPC and ROI “Stretch”

Written on
March 26th 2007
Author
by Joe Chin  |
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Much has been written recently about online advertisers shifting away from traditional pay per click (PPC) campaigns in favor of new cost per action (CPA) models. Even Google, one of the founding fathers of PPC, which got fat dining at its buffet, has stuck its mammoth toe into the CPA pool.

It’s clear that CPA models provide a more easily measured and less-subject-to-click-fraud alternative, but there’s abundant evidence — that’s just as clear — that PPC is nowhere near its death bed. And I am not talking about easily referenced data points such as the PPC multi-billions being cranked out by Google, but rather, I cite the “ROI Stretch” that is voluntarily being made by advertisers to justify the end-of-the-line tabs being rung up in PPC campaigns.

Scapegoat for Click Fraud?
Much of the negative sentiment toward PPC can be clearly traced to the industry’s distaste for click fraud. PPC, which leaves it up to the customer to establish the connection from bid to benefit, has basically been accused of leaving the barn door open to the click fraud bandit.

Certainly, the ad networks are responsible for policing fraudulent behavior, as any upstanding business should do. And the industry, as well as the government, should certainly press the ad networks to ensure that they are doing everything possible to this end.

However, it’s important to recognize the role advertisers play in justifying the — in some cases — outrageous CPCs being doled out for often poor quality traffic.

The ROI Stretch
Specifically, as CPCs have continued to rise in concert with the number (and on some ad networks, volume) of click frauders, advertisers hooked on easy-to-acquire PPC traffic have gotten into throwing everything and the kitchen sink into their ROI calculations. Without a doubt, certain items outside of the straightforward online purchase deserve to be included. For example, the buying influence that carries over to related purchases at brick-and-mortar locations should definitely be factored in. In the case of some retailers, over 60% of Web site visitors who go on to buy will do so at one of their brick-and-mortar locations. Another tangible benefit is the branding gained from appearing at the top of a search results list. Although we remain a good ways away from definitively determining its value, such branding should still be factored in a substantial way.

However, when the ROI Stretch starts to include more esoteric items, such as the acquisition of longtime, loyal customers, some deeper questions beg to be asked. First, don’t many advertisers realize, when acquiring and directing traffic to a deep site page, and redirecting such visitors to another site, that the majority of visitors have low recognition and recollection of the site’s name, as well as the URL? Second, how accurately are we measuring and quantifying these supposedly loyal visitors that we have gained?

Such questions lead to an even bigger question — what responsibility do advertisers bear in being true to their own PPC purchases? In this day and age, we are at a point of sophistication where each and every aspect of our online operations can and should be measured. Armed with such data and analysis, a true

ROI can be ascertained, inclusive of fraudulent clicks, against which a sensible PPC ad spending strategy can then be crafted.

So is PPC really to blame when instead of adhering to such best practices, we choose to indulge ourselves in a little ROI Stretch and pop those bids up just a little bit more? And as long as this is the case, is there any chance we would allow the medium that allows us such indulgences, to ever fade away?

Time will tell. But for now, in one man’s humble opinion, PPC and the ROI Stretch are here to stay.



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Reader Comments.

nada

Posted by steve | 11:50 am on March 26, 2007.

Your take on the ROI Stretch may explain why there is more advertiser complaint of click fraud versus real action. I am not completely bought into the click fraud uproar, but for those who are, I am struck by the lack of personal responsibility related to it.

just some thoughts on it.

Posted by Steve Haar | 3:43 pm on March 26, 2007.

Pay Per Click (PPC) has partially been so successful due to Made For AdSense (MFA) Pages. Without these optimized landing sites and “Ads by Google” there would be a lot less ranting and raving about Cost Per Action (CPA) or (PPC) models. Many times “Greed” outweighs “Do No Evil” for publishers.
———————————————
Is Google’s “do no evil” logic getting fuzzy?

Sergey Brin and Lawrence Page, Google co-founders, warned of the potential for advertising evil in their Google prototype developed at Stanford University:

The predominant business model for commercial search engines is advertising. The goals of the advertising business model do not always correspond to providing quality search to users…we expect that advertising funded search engines will be inherently biased towards the advertisers and away from the needs of the consumers. Since it is very difficult even for experts to evaluate search engines, search engine bias is particularly insidious…advertising income often provides an incentive to provide poor quality search results…In general, it could be argued from the consumer point of view that the better the search engine is, the fewer advertisements will be needed for the consumer to find what they want. This of course erodes the advertising supported business model of the existing search engines.

Brin and Page declared their intent to take the “high road,” regarding search engine advertising:

We believe the issue of advertising causes enough mixed incentives that it is crucial to have a competitive search engine that is transparent and in the academic realm.

Source: http://blogs.zdnet.com/micro-markets/?p=1131
——————————————–

Posted by Martin Garcia | 5:48 pm on March 26, 2007.

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