The world of pay-per-click marketing started in 1997 with GoTo.com. Today they are known as Yahoo Search Marketing. What started in 1997 as a way to quickly get listed in the top of the search engines has turned into a 5.6 billion dollar industry in 2005. In fact, about 99% of Google's revenue comes from advertising.
However, this multi-billion dollar search industry is under attack and has been for quite a while. Clíck fraud has become the greatest threat to the rapid growth of the paid search marketing sector. The Interactive Advertising Bureau estimates that 20 to 35 percent of ad clicks are fraudulent.
Who's to blame? Clíck fraud can come from a variety of sources, including competitors, bots that simulate the human behavior of clicking on ads in web pages, or even friends of the publisher who want to "help" the publisher gain some additional clíck revenue.
However, the major search engines have received the majority of the blame, even though they are not necessarily responsible.
Yahoo has recently settled a class-action clíck fraud settlement. Under the settlement, Yahoo advertisers will be allowed to submit clíck fraud claims dating back to January 2004. Yahoo will reimburse any confirmed fraudulent clicks in cäsh, with no set limit on the amount of claims it will cover.
This year, Google has been burdened with its own clíck fraud case to the tune of 90 million dollars. Currently, the court is deciding whether to accept the search giant's proposed $90 million settlement while roughly 50 plaintiffs are voicing their dissatisfaction with it.
Clíck fraud is certainly no small matter. It has become larger than the total magnitude of credít card fraud in the U.S.
So far, these law suits have spawned more questíons than answers for the ultimate solution to clíck fraud. Clíck fraud threatens an entire business model; one that is generating billions of dollars every year.
At this point, it's hard to tell whether pay-per-click advertising will stand the test of time, or line up for the chopping block.
Microsoft is currently engaging in research to develop new, clíck fraud resistant advertising models. Joshua Goodman, a Principal Researcher at Microsoft has published a white paper on pay-per-percentage as a solution to click-fraud.
Pay-per-percentage is an advanced form of pay-per-impression. Within this system, someone can bid for a percentage of all impressions for certain keywords or keyword phrases over a specified period of time. In the pay-per-percentage model, clíck fraud is avoided because the advertiser is not charged any additional amount for clicks. The business model is based upon a percentage of ad impressions.
Microsoft research describes it as:
"A simple method for selling advertising, pay-per-percentage of impressions, that is immune to both clíck fraud and impression fraud... ads must be shown in a truly random way, across the percentage of impressions purchased..Pre-fix match: a system that is similar to broad-match, but more compatible with pay-per-percentage... auction pay-per-percentage matches, including prefix matches in a revenue maximizing way...make it easier to sell to advertisers."
The Google Adwords system itself was initially based on a cost-per-view model. Unfortunately, there was a lack of enthusiasm for the cost-per-impression services and they switched over to the pay-per-click model.
