Lessons from the financial crisis for CPCs

CPC as a model works fine when dealing with large publishers sites (Google / Bing / Facebook) directly as they are a significant enough source of revenue and they have the tools for you to manage the paid traffic they send you on a site by site basis. You pay for people who are searching for a topic or product where you think you can offer them a relevant product service.

If Google don’t send you relevant traffic then that keyword isn’t working for you and you’ll change how much you are willing to pay for it. The more disagreggated the campaigns are (exact matches) the better results you are likely to see.

However with other online ad serving methods such as content networks and syndicated PPC you are often advertising through several or, more likely, many publishers and therefore the CPCs are aggregated across these publishers.

This aggregation leads to a disconnect between the sales motivation for the merchant and the motivation for the publisher. The merchant wants high quality converting traffic where the publisher wants to send high volume cheap traffic.

From the merchant perspective, the merchant cannot often choose CPC by publisher (although Google’s smart bidding technology on their content network goes some way to solving this) and for the majority this is like having one CPC for all the keywords in an adwords campaign. Some publishers might be sending you great traffic, some will be sending poor traffic.

From the publisher perspective, I know that I have to send a certain quality of traffic in order not to get kicked off the network. Should I send lots of high quality traffic at the most cost to myself or should I send the least quality traffic I can? The model motivates me to send volume. The optimum position for me is the most amount of volume at the minimum cost to me while exceeding network minimums. That is not the same as the best ROI for the merchant.

An analogy to me is the same as the financial crisis. Packaging up good and bad debt and selling it for an average. When merchants, like the banks, realise the bad debt element is worthless will this model also collapse?