Remember when Bob Metcalfe predicted that the dot com bubble would pop, largely because banner ads sucked. He got the date wrong but for the most part he was on the money. Since then, of course, pay-per-click targetted online advertising has come along on its proud, white stallion and saved the dot com damsel from distress.
However, that knight in shining armour, might have a few chinks in its plates. ‘Click Fraud’ is finally getting some attention, via this Wired article and this Paul Kedrosky blog post. Wired reckons up to 40 per cent of ad revenue is click fraud generated. Are we at all surprised?
The Web 2.0 community has every right to be shit-scared about this. It’s not quite in the Metcalfe prediction league yet, but it’s an early warning. Slice 40 per cent out of Google’s revenues and suddenly it’s numbers aren’t looking nearly as pretty. Factor in the impending competition from Microsot and Yahoo, which is sure to drive click prices down and the situation looks even bleaker. Consider the fact that just about every Web 2.0 startup is banking on being acquired by one of the companies that will be affected by this, or else are looking to ad revenues themselves and you’ve got an entire ecosystem balanced on something that, Squash reckons, is going to look increasingly precarious.
What these article show is that pay-per-click is a fundamentall flawed concept – eventually Squash reckons it has to be replaced by, if not pay-per-sale, then certainly pay-per-qualified lead. How many Web 2.0 businesses are looking at delivering those kind of outcomes?