The Future Business Model Of Ppc, The evolution of PPC advertising Options

[Alarr]

PPC search engines hit us like a storm when GoTo launched some years ago. However, several other business models that started with a pay-per-use pricing model eventually changed to umbrella pricing to maximize revenue.

Theme parks are an excellent example. When Disney World first opened its gates, admission was free! Ticket booths were scattered across the park allowing people to buy one ticket for one ride. Disney eventually learned that their average revenue per customer would sky rocket if they charged one admission fee and allowed people to roam and ride as they please.

Will search engine advertising follow this same path? How might search engine advertising evolve in the future?

[rohgan03]

One direction is increase of pay per sale or commision based affiliate program type of advertising...not sure how popular it would get though

[Haystack]

One big difference between a pay per ride amusement park model and your average PPC model is the cost of labor.

Another difference is the transaction process itself. A PPC advertiser may purchase thousands (or millions) of PPC ads a month, but only enters their billing information once.

Amusement parks would probably love to use an auction format to sell spots in the line for popular rides, but that would be VERY difficult logistically and sociologically.

[goodman]

One big difference between a pay per ride amusement park model and your average PPC model is the cost of labor.

Another difference is the transaction process itself. A PPC advertiser may purchase thousands (or millions) of PPC ads a month, but only enters their billing information once.

Amusement parks would probably love to use an auction format to sell spots in the line for popular rides, but that would be VERY difficult logistically and sociologically.

Also, people don't generally make money from riding rides in an amusement park. They're just spending it.

All-you-can-eat advertising? Fine for the publisher if it's priced at $10,000,000. Fine for the advertiser if it costs $100. We appear to have a gap of $9,999,900. This won't work.

[Alarr]

This is what I was thinking of...

If the industry evolved away from pay-per-use (PPC), the next logical step would be to choose a keyword and bid for placement for a specified period of time rather than a clickthrough.

For example:

June 2005 - Search Term "Widget"
1st position bid = $100
2nd position bid = $95
3rd position bid = $90
Bidding ends May 30th, 2005 at 11:59PM

In the example above, companies can still bid on a search term, but rather place a bid per clickthrough, it's actually for fixed placement for an entire month. Of course, the company would have access to stats to display the keyword history etc...

Evolution solves weakness. So what weaknesses does this solve?

1) Click fraud - There are security measures in place to prevent click-fraud... but it still happens. Companies no longer have to worry about click-fraud.

2) Time and attention! Companies can spend less time managing bids! Once all the bids are in, they are set for an entire month.

I'm sure I can think of a few other problems this solves... I just wanted to get it started...

We are still working with a bid model which is economic utopia when it comes to pricing.

I should also note that I've had my own industry specific search engine (directory rather) online for 7 years that receives a lot of traffic... but I'm not selling anything now just don't have the time (let's call it a hobby for now).

[Haystack]

That sounds less efficient to me. The most efficient system I can think of would allow advertisers to pay exactly what they want (or bid to exactly the position they desire) for any time of day, day of week, etc. Real-time auctions accomplish this, while fixed pricing for any period of time does not.

Anything less causes overpayments during low-conversion periods and leaves money on the table for advertisers during high-conversion periods.

2) Time and attention! Companies can spend less time managing bids! Once all the bids are in, they are set for an entire month.

What happens if a product goes out of stock, or they decide they want to ramp up their sales after hiring an additional sales person?

[Alarr]

That sounds less efficient to me. The most efficient system I can think of would allow advertisers to pay exactly what they want (or bid to exactly the position they desire) for any time of day, day of week, etc. Real-time auctions accomplish this, while fixed pricing for any period of time does not.

It's more about maximizing revenue for the SE.

Anything less causes overpayments during low-conversion periods and leaves money on the table for advertisers during high-conversion periods.
What happens if a product goes out of stock, or they decide they want to ramp up their sales after hiring an additional sales person?

Overall, would create more revenue for the SE... by increasing the average CPC (although they are no longer paying per click).

I don't see the company going out of stock as any barrier... companies hopefully can forecast at least a month in advance. (IMG:http://www.highrankings.com/forum/style_emoticons/default/wink.gif)

[Shane]

What Google seems to have learned better than just about any other company around these days is that revenue is truly maximized by giving the customer exactly what they need -- not forcing them into a system that, in the short-term, makes the company the most money.

[Haystack]

It's more about maximizing revenue for the SE.

Revenue is maximized for search engines when they provide value to advertisers. That's what keeps the ad dollars coming.

I don't see the company going out of stock as any barrier... companies hopefully can forecast at least a month in advance.

Based on experience working with retail clients near the holiday season, that's simply not the case. Products go in and out of stock with every order, and every new delivery from manufacturers and distributors. They only want to advertise what's in stock, or will be SOON, since people will flip if they receive a backorder notice. Advertising out of stock items would also be a bad for the other two players in this equation, the search engine and the searcher. Searchers will become frustrated with the quality of results on a search engine, creating more problems than it solves.

Fixed priced advertising can work for run-of-site advertising, but it doesn't make sense to me for advertising (like search) where more efficient markets have been created and thrive.

Compare Overture/Yahoo, and Google, to LookSmart's valuation to get a feel for the difference. A search site can't get advertisers to pay a penny more than a click or position is worth, and they're leaving money on the table if they don't collect the real-time market rate for a term.