Donna Bogatin of ZDNet has a nifty little quote from Google CEO Eric Schmidt on click fraud. In that quote, Eric says that the “perfect economic solution” is to just let click fraud “happen”. He claims that the PPC market will become “self-correcting”. In otherwords, as click fraud becomes more and more rampant, the price of a click will be worth less and advertisers will continue to pay less and less for a click until click fraud is basically un-profitable.
I touched on this, although not quite so succinctly, a couple of days ago.
As click fraud becomes more and more of a problem, more and more advertisers will pull some if not all of their money from the PPC market. Prices will drop. Earnings will drop. More and more publishers will stop using PPC advertising.
While it’s fairly obvious that this may end up being a rather broad explanation, it also appears that I’m not too far off of Eric’s prediction. PPC isn’t going to go away altogether. Some advertisers will stop using it, but a majority of them will stick around and the PPC market, like many other markets, will go through regular “corrections.”
One side effect of this will be the decline in usage by publishers. Don’t panic. I’m not saying that it publishers will stop using it altogether. I just think that as the PPC market corrects for click fraud and the value of a click goes down, it will become less valuable to publishers who have less than stellar impressions and CTR’s.
Take for instance, this site. Thatedeguy’s impressions and CTR, while better than some, are certainly less than stellar. I can earn more from text links than I can from PPC. So why should I continue to dedicate my prime site real estate to PPC, when it could be used for much more profitable ventures? The truth is, I may not continue that practice. And I believe that many publishers like myself are considering the same thing.
Yes, it will be “self-correcting” but in the end it will also mean that the market will shrink some. As more and more PPC providers such as Google, MSN, and Yahoo come into the market, the aforementioned big three will need to find ways to reduce click fraud in order to keep their market share. If a provider were to come out right now that would guarantee a lesser click-fraud percentage than any of those three, acceptance would be rampant.
Better living through software seems to agree with me.(or I with him. Depends on how you look at it.)