Pay-Per-Click Ads Are "Indifferent Displays of Advertising"

Beyond affiliate and cost-per-action advertising, all paid media advertising models — from billboards to print ad to TV spots to pay-per-click text ads — are “indifferent displayers of advertising.” I lifted that apt phrase from Bruce Schneier’s Wired piece on Google’s click fraud crackdown:

Google is testing a new advertising model to deal with click fraud: cost-per-action ads. Advertisers don’t pay unless the customer performs a certain action: buys a product, fills out a survey, whatever. It’s a hard model to make work — Google would become more of a partner in the final sale instead of an indifferent displayer of advertising — but it’s the right security response to click fraud: Change the rules of the game so that click fraud doesn’t matter. [Bold is mine]

Schneier used this “indifferent displayer” phrase in the context of discussing the security problems inherent in the specter of click fraud. But it points to the larger problem with pay-per-click advertising — it’s measurable and accountable, which is a huge leap forward from traditional advertising, but at the end of the day, pay-per-click ads DON’T CARE what happens after you click.

As Schneier points out, this is why Google is focused on developing a cost-per-action model. And he’s right that it’s “a hard model to make work” — especially if you’re Google, with a $6 billion pay-per-click cash cow at risk. How does Google get advertisers to value cost-per-action without fundamentally devaluing cost-per-click? Google will try to have it both ways — to be a true partner in carrying the risk of cost-per-action and an erstwhile “partner” in pushing cost-per-click.

But the problem of click fraud will likely lead a lot of advertisers to seek out advertising platforms that are “partners in the final sale” and not “indifferent displayers.”

Google of course has its huge network of AdWords advertisers and AdSense partners, which is a considerable advantage in developing a new cost-per-action model.

But like Microsoft, which had previously enjoyed the advantage of a huge installed base, Google hasn’t cornered the market on innovating advertising value propositions and creating new dynamic models.