IDEA No 47
PAY PER CLICK
In February 1998, Jeffrey Brewer changed the advertising industry forever. He introduced the world to pay per click.
Pay per click (PPC) is a model in which advertisers pay a website owner only when their ad is clicked on. It eliminates the uncertainty of pay-per-impression (PPM) models, where the advertiser pays each time the ad is displayed, regardless of whether the viewer takes any action.
Although the model is now synonymous with AdWords, Google was slow to adopt PPC. AltaVista, Excite and Yahoo! got there first, adopting Brewer’s goto.com platform in the late ’90s.
Google has always displayed sponsored links next to natural search results, but it originally operated a pay-per-impression model. As with banner ads, advertisers paid per thousand views. Google AdWords launched in 2000, and with it Google adopted pay per click. It was a straight copy of the goto.com platform with one small adjustment. Instead of ranking advertisements by bid price alone, they took into account the click-through rate. Those that are clicked on more rise to the top, encouraging quality and maximizing Google’s profits. Advertisers loved it. Searchers welcomed it. Google built an empire on it.
Pay per click shows no sign of slowing down – the model Brewer developed dominates online marketing. Pay-per-click advertising generated revenues of $42 billion for Google alone in 2012. That is a lot of clicks. The billions Google earns from AdWords not only fund its natural search business but also allow it to invest in its cloud-based services, such as Gmail, Google Maps and Google Docs – the services that shaped Web 2.0.
Sponsored links have undoubtedly shaped the Web, but does offering a shortcut to the first page of Google search results undermine the integrity of the Web? As more and more brands join the feeding frenzy, Google and other search engines further degrade their own raison d’être. Perhaps pay-per-click inflation will encourage brands to rethink their approach to online marketing, but while they can pay Google to look the other way, I doubt it.■
