Future of PPC industry

[Duckinla]

Had an interesting conversation the other day on the future of the pay per click industry.
My concern was that as more people "publish" or create sites just for advertising clicks, there will be a glut of clicks and clcik values will go down.

My friends point of view was that, regardless the number of domainers, clicks will always be limited by the number of people reaching those sites and the number of people willing to click on ads. That may have a huge growth rate at the moment, but it does have a limit. On the other hand, the "demand" side or advertiser side is still very young on the internet and is pretty much limitless. More companies will be doing online advertising and doing it more often. We might see a short term where supply of clicks is too high for the demand but in the long run demand for clicks will always be greater than supply. This will cause click values to rise rather than fall.

I tend to think now that maybe he's right. Your thoughts?

 

[Beachie]

There are too many factors to predict I think.

The limiting factor in this system is the number of humans browsing the web. Companies always have the ability to sell more widgets and will always want to buy as many clicks as they possibly can (assuming the clicks = widget sales). If people stop clicking, the value of a click goes up (i.e. clicks are harder to get, and are therefore worth more).

My guess in the short and medium term is that more advertisers are seeing the benefits of Internet advertising, and more advertisers means more competition for clicks, and more CPC.

In the case of an economic downturn, advertisers may be driven to drop conventional advertising for the efficiencies of PPC, so even if total advertising dollars drop, we may still see an increase in Internet advertising.

 

[GT Web]

Beachie is right, there is a ton to consider.

One point I would like to bring up is click fraud. An increase in click fraud pushes the demand for clicks down and subsequently there is lower demand at all price points. Parking/advertising companies must continue to eliminate fake clicks, otherwise advertisers will continue to drop their bids until it makes economic sense for them to continue to use PPC ads.

 

[touchring]

I think all these factors are only relevant to Google. Doesn't matter how much Google earns, if they reduce the payout to the PPC companies, we get squeezed.

 

[Beachie]

Beachie is right, there is a ton to consider.

One point I would like to bring up is click fraud. An increase in click fraud pushes the demand for clicks down and subsequently there is lower demand at all price points. Parking/advertising companies must continue to eliminate fake clicks, otherwise advertisers will continue to drop their bids until it makes economic sense for them to continue to use PPC ads.

Good point, GT. I think G and Y! have to stop blaming publishers for click fraud. They are ultimately responsible for filtering the ads. It's no different to blaming road builders for the bad driving of motorists.

 

[typist]

"Click fraud" is an issue, and has been particularly prominently featured in print media. Do I smell a conflict of interest here?

Advertising spending is shifting quickly from traditional to online media. According to Martin Sorrel of wpp.com, the internet will grow to account for 20% of worldwide advertising spending, at the expense of traditional media. I think his estimate is conservative.

I am not too concerned about "click fraud" (yet): for traditional media, our competition as publishers, measuring performance is very hard. Performance indicators for traditional media are so rough that less than 2% - a current estimate of the amount of "fraudulent" clicks - would be well within appropriate margins of error, and negligible in terms of performance measurement.

Pay-per-click, which to us may seem like a crude concept, is highly attractive to advertisers who are used to pay for rough guesstimates of traditional media.

Further, I am confident that globalization will create a steady supply of new middle-class consumers (unless interventionists, reactionary protectionists, narrow-minded nationalists and other enemies of markets, trade, freedom and economic development shoot both themselves and us in the foot by building too many walls).

As emerging markets develop, overall productivity rises and we are all better off. Global economic development is driving demand for more advertising in several ways. I am confident that the advertising market as a whole will continue to grow.

I also share Duck's optimism for the online advertising market: more companies will be doing online advertising and doing it more often. Online advertising is growing faster than the overall market, because of fundamental shifts which are there to stay for a while.

I think the medium-term future of click prices is bright for online advertisers.

 

[Duckinla]

One point I would like to bring up is click fraud. An increase in click fraud pushes the demand for clicks down and subsequently there is lower demand at all price points.

I don't worry so much about click fraud. Mostly because advertisers expectations for conversion are not that high anyway. If I have a 3% conversion expectation, I will adjust that down to 2.7 out of 100 rather than 3 out of 100 if I think 10% of the clicks are fraudulent. Advertisers weren't expecting anything to happen with 97 out of every 100 clicks anyway. Now that becomes 97.3. Click fraud only increased my worthless clicks by 1/3 of a percent.

 

[Biggie]

with a 26% increase in internet sales, from this time last year, it proves that more advertisers/manufacturers and retailers are coming to the net.


as long as there is a mouse...there will be clicks.

unless the sound is changed from "click" to "doink", then we will have doinks!

as long as there is an internet, there must be a way to connect

what does all that mean, yes there will be clicks and people willing to pay for them.


i predict new technology in advertising, only in infancy

ask me!

 

[Duckinla]

In the case of an economic downturn, advertisers may be driven to drop conventional advertising for the efficiencies of PPC, so even if total advertising dollars drop, we may still see an increase in Internet advertising.

This is a good point. Sometimes we underestimate how incredibly efficient pay per click advertising is for the right industries. A customer must already be on a site related to your advertisement. Then the customer has to be interested enough to click on your ad. You only pay for those customers! Compare this to paying thousands for a newspaper ad and hoping a few of your target customers will happen to see it. PPC can be especially good for specialty industries where your target customer is a very small percent of the population.