This is an interesting thread.
Honestly, until I launched a website, I never clicked on the ads, and I'm an old fart. I didn't even consciously notice them, I suspect I'm so used to being hit over the head with (and turned off by) advertising that I subconsciously filtered them out. After launching I asked a bunch of people I know in their 20's to their 50's if they clicked on ads, and very few did. Most like me said "Hmmm, I never even noticed those). That was a couple years ago though.
I do click on PPC ads, but almost always go a few pages deep with organic pages before I resort to that. The reason is that so many of the PPC ads do not lead to good relevant landing pages. Maybe it's the things I search for, but my experience is quite different than Jonathan or Scottie, I'd default to the ads if I thought they were more relevant than organic listings, but I usually don't. I assume, and usually correctly, that the organic results, the legible ones, are taken from content on the page so I have a decent chance of anticipating what I'm getting.
The reasons I tend to put PPC in lower status are poor implementation by rookies (linking to home rather than landing pages) or malfunctions (those could also be a rookie error inputting bogus urls) and especially that damn dynamic insertion of search terms into ad titles. This practice infuriates me ... if I see an ad for nextag, pricegrabber, bizrate, and especially ebay, I overlook them, and they tend to dominate pushing the more relevant ads down or to the next page. They have abused this practice to the point that the majority of their ads lead to a 'product not found' search results page or a substitution for the item THE AD SAID WAS FEATURED. If I search for "Stewart banjo" and your ad says "Stewart banjo" then I don't want your freakin' general banjo listings eBay, only your Stewart banjo results. I know it works, but it has completely undermined the PPC results so that people like me don't trust them (much) anymore. My biggest frustration is that Marketing Experiments, who I respect greatly, have recommended the use of this in their web clinics ... because it works ... so now there are more of 'em.
Like I said above, I do follow the ads, but I've had to develop a pretty sophisticated internal filter to determine which ones are manually written and which ones are dynamic 'tricks'. I would expect that less sophisticated users, mom for example, will have that happen once or twice and decide that all ads are bogus.
I do agree though that for a number of searches anymore, especially more generic searches, if you want to buy something, it's hard to find a merchant in the first few pages. If you search for widgets, you get widget info sites. If you search for blue speckled widgets, then you start to see the merchants show up in organic listings. That will almost certainly increase as the web grows and more widget lovers put up their widget hobby sites, so PPC is likely to become more important.
Edited by arlen, 10 October 2006 - 01:21 PM.