Article by LinksManager.com Staff - © 2008, Reproduction without permission prohibited.

The Lincoln-Douglas debates all American children studied in grade school have nothing on the new millennium's on-going debate over the pros and cons of pay-per-click (PPC) advertising.

Does it work? Is it cost effective? Are pay-per-click programs honest? What is the relationship between pay-per-click and traditional linking strategies?

To attempt to answer these questions, it's important to understand what pay-per-click is: Nothing more or less than a commercial variation of reciprocal linking. That may sound odd, but it's true. In a pay-per-click scenario, a web operator - say, a search engine, displays a link to your site on one of their pages. In return, in reciprocation, for someone clicking on that link, you pay the originating site operator a certain amount of money.

The downside of this, of course, is that you have to pay for every click you receive, including the fraudulent ones which, according to the experts at ClickForensics, rose to 17 percent of all pay-for-play clicks generally and over 28 percent of all Google AdSense and Yahoo Publisher clicks in Q4 2007. (For more on click fraud, keep reading.)

Furthermore, both traditional reciprocal links, pay-per-click links and the vast majority of other web links, belong to the same species of animal: They are all traffic-delivery systems. They exist to encourage (in the case of commercial RLs and pay-per-clicks) and/or enable (purely informational links) people to commute between websites, to migrate from one site to another.

Both pay-per-click and traditional reciprocal linking have pros and cons and both have their place in a comprehensive linking strategy for many types of e-businesses whose operators who can afford the costs -- particularly those incurred by having to pay for fraudulent clicks -- of adding a pay-per-click program to their other marketing efforts.

Since most of the other articles on these pages deal with various aspects of traditional linking, this one will be focused on pay-per-click. But before going any further, one point must be made perfectly clear. Quality, relevant non-commercial (i.e. free of cost) links are the building blocks of successful e-commerce marketing and are virtually essential to drive business to and/or improve the search-engine visibility of the vast majority of commercial websites.

While pay-per-click links can be greatly effective in generating traffic for some - but not all - types of sites, they are correctly considered ads by the major SE ranking algorithms. Unlike good, end-user focused reciprocal links, which frequently improve a site's return position, paid-per-click links CANNOT improve a site's page rank or natural return position in any way whatsoever.

The main advantage of pay-per-click is reach - a pay-per-click ad that periodically runs on popular search-engine pages is going to receive tens or hundreds of thousands of page views. That doesn't mean that all - or even a high percentage of -- the people viewing that page will notice any given PPC ad and click on it, but a fair number may.

Another advantage is that you can control your cost, in most cases by setting a ceiling on how much money you want to spend over a given time period - say a month. When you have reached your spending limit, your links aren't displayed for the rest of that month.

Pay-per-click also has disadvantages. Since you are paying for each click-through, you can easily run through a lot of money without making a sale, particularly since you have no real way of controlling whether or not your pay-per-click ad will appear on pages that have serious potential for your product or services or whether the clicks you get are real or bogus.

With most pay-per-click programs, you specify keywords and the PPC operator programs the system so that your link only appears on return pages for searches on those keywords or on pages of sites relating to them. Which is great as far as it goes. Unfortunately, many people don't search that precisely. If they're looking for an opal ring, they may only search for "jewelry" or "rings." If you've bid on the keywords "rings" or "jewelry" and you don't happen to deal in opals, you may wind up paying for a ton of hits that don't deliver any sales.

This is also true with natural links, of course, but you're not paying for those. In any case, it's important to be even more precise with the text in a PPC ad than with the anchor text in a natural link. With PPC, what you don't want is anyone and everyone visiting your site. What you do want are qualified customers.

Another negative PPC factor, in many cases, is cost. Buying pay-per-click ads is like buying advertising time on a broadcast network, the cost is determined by the popularity of the network (i.e., the PPC provider's own site, plus its affiliates' sites) AND the popularity of the program (i.e., the keyword). While the minimum per-click charge for the keyword "djellba" may be only five or ten cents, the minimum for search terms like "web hosting" can be five or more dollars - per click.

And those are just the minimums. What you are really doing when you sign on with a PPC provider is "bidding" on keywords. If you bid $1 per click for the keywords "web hosting" and a thousand other people have bid more than a dollar, your PPC link is not going to appear online very often and/or very prominently. Since you pay nothing when you don't get hits, there is no out-of-pocket penalty for underbidding, but it obviously will negatively affect the success ratio of your PPC program.

All that aside, the biggest negative with pay-per-click advertising, and the source of most of the controversy, is fraud: automated bots or underpaid humans endlessly clicking links as fast as electrons and fingers can move.

Click Forensics CEO Tom Cuthbert says that click fraud has become so pervasive (more than 60 percent of all traffic generated by "parked domains" used to harvest clicks for advertisers is reportedly phony) that many "keyword buyers" are simultaneously seeing their costs skyrocket and their sales decline.

The results, according to Cuthbert, are a loss of credibility for all internet advertising and increasing numbers of web-savvy advertisers cutting back on their pay-per-click programs.

Though it's hard to document exactly what causes earnings declines, Cuthbert's theory seems a likely reason why Google's number of paid clicks declined by a reported 5 percent in January, triggering a double-digit drop in Big G's share price.

Why is there fraud? What do the crooks get out of it? Where's the payoff? A quick examination of the PPC business model shows that it is a classic example of multi-level marketing - in other words a pyramid. (Think of a Shaklee dealer or Avon Lady recruiting an infinite number of "little" Shaklee and Avon persons and getting a percentage of all their sales.)

At the top of the pyramid sits a major web portal, let's call it Yogle.com, Yogle.com has a PPC program that it calls SelzSite. You sign up with Yogle.com and agree to pay $1 for each click-through that comes to your site via SelzSite. In order for Yogle.com to maximize their returns, they allow virtually anyone with a website to become an "affiliate" - i.e. to subscribe and display SelzSite ads.

For each click-through these second-tier vendors originate, Yogle pays them a percentage of your dollar. So far, so good. Most alleged pay-per-click fraud doesn't happen at the top level of the pyramid, it occurs further down, near the base, where ever more sub-levels are located.

At this point -- after your $1 has, like street heroin, been cut so many times that only tenths of a penny remain -- there really is little reason for honest site operators to feature SelzSite links. The only way these bottom feeders can make money is by using what Business Week magazine describes as a "dizzying collection of scams and deceptions that inflate advertising bills for thousands of companies of all sizes" to the tune of "roughly $1 billion" annually."

According to major PPC providers, the controversy over pay-per-click fraud is, if not exactly a "tempest in a teapot," considerably over-dramatized. While it may have been a major problem in the early years of PPC deployment, they say, increased emphasis on using human and artificial intelligence agents to identify evildoers has drastically reduced the incidence of fraud. Furthermore, they contend, they regularly issue refunds to site operators who have been charged for fraudulent click-throughs.

Critics are not convinced. They point out that the click fraud rate reported by Click Forensics rose by over 2 percent in 2007 and that some victims of PPC fraud -- those who could afford attorneys -- have had to go to court to get their promised refunds.

Not every expert agrees.

"The major engines, companies like Google and Yahoo, have invested millions in dollars and people hours, to ferret out and eliminate click-through fraud," says technology journalist and web consultant Michele Delio. "While fraud is an issue, I don't think it happens all that much or the ad model would have broken down. PPC makes sense and it works - just like relevant reciprocal links. They are two separate deals, two ways of bringing traffic to a site and savvy webmasters use them both."

Is adding Pay Per Click to your existing linking program a good idea? Depending on the nature of your business, your selection of keywords to bid on, and the amount your competitors are paying for the same keywords, PPC may produce an excellent return on your investment or it may turn out to be money poured down the drain.

In either case, it's important to never lose site of the marketing reality that the best links are not commodities bought and sold at auction like broken dishes from a marriage gone ugly.

The best links are those given and exchanged freely based on quality and relevancy... natural links that provide service, value, and information to the web surfers who follow them.

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