January 14, 2004

Bid prices in PPC (and hence the cost per click) are going up, but this can be explained by the rising awareness of PPC's potential effectiveness.

In Sebastian Junger's book "A Perfect Storm," three storm systems combine to create a deadly situation for the crew of the fishing vessel Andrea Gail.

Each of these meteorological events would have been difficult alone, but in Junger's narrative, all three combine to cause extreme mayhem in the North Atlantic.

Such is the scenario that's beginning to emerge in the world of pay-per-click (PPC) advertising. While the result may not be entirely lethal, it could be a marketing deathblow to those dependent on Internet promotion.

In Storm 1, the turbulence is relatively mild. Bid prices are going up. It seems that ad click traffic is continuing to grow, but fewer visitors are clicking through.

Likewise, Storm 2 looks typical enough. Search properties like Google are increasingly using affiliate sites to serve up more ads than they could on just their own search sites in order to extend their reach. So far, there's nothing to get terribly excited about.

But when you toss in Storm 3, the brew gets a bit headier. It seems that ad click traffic is continuing to grow, but fewer visitors are clicking through to either take some kind of meaningful action or actually transact business. In other words, clicks are increasing, but conversion percentages are declining.

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