e-Bay says that its ads on Google generate 25 cents for every dollar spent so it is cutting back to selected markets. The same Register article quotes Google as saying that its data shows that, even for market leaders, 50% of sales resulting from pay per click contacts are incremental. What is certain is that large on-line retailers are starting to take a cool look at the returns on their advertising spend.
So what about the actual return to small firms from paying per click?
My views on the the value of unqualified leads from adverts (let alone the click you pay for on-line) are scarred by a DTI (now the Department for Business Innovation and Skills) campaign in the early 1980s encouraging small businesses to contact their local Microsystems Centre. DTI was proud that the campaign generated 16,000 enquiries. My staff at the NCC Microsystems Centre received 4,000 of these. We would have been paralysed save that we had just taken on a fresh batch of work experience trainees from the Threshold Programme (a very successful BTEC double sandwich).
We used the task as a supervised sales training exercise, every enquiry was responded to and "qualified" as a potential paying customer. Over 90% were only interested in whatever was free. They had assumed, mistakenly, that a DTI paid advert mean a freebie. Since DTI was paying for nothing other than advertising and we were running at break-even with no outside funding, that left 400, most of whom ended paying £5 or less a set of guidelines. Barely 20 paid £25 for our "flagship" half day workshop on how to budget, choose and use a microcomputer. None paid for professional advice. By contrast an article in Daily Telegraph, shortly before, had produced over 200 leads, almost all of whom expected to pay for advice. When the Telegraph article was, however, repeated, (with our permission), in the middle of a full page advert (mainly white space) by a commercial computer retailer, it lead to under 20 enquiries.
Social networking - physical and online activities
A couple of months ago I attended an event on the use of social networking by the Obama re-election campaign and was struck the way it mixed physical and on-line activities. The pizza leaflets that I receive through my door now all contain websites for me to order on-line. But I hardly ever do so. I found the only take-away from which I order over the Internet (a Thai service which I recommend to others) via a Google search. Unfortunately that search also kept popping up ads which tried to route me to Thai restaurants in order parts of London. I therefore clocked up a lot of clicks that were never going to lead to business - although I did browse menus and compare prices. A more recent search for opening and closing times of a local Italian restaurant was similarly frustrating. I rang up to book a table instead. Does that mean that the market is over-hyped or "merely" that it has some way to go before reaching maturity in terms of customer service?
I should add that I am also deeply frustrated at the lack of information available to help me make a rational decision when my search engine, browser, operating system and security software start fighting each other over the security or otherwise of a site I am visiting whether via search or because I have clicked on an advert. I usually give up - and thus enter the statistics of "abandoned sales" that last years British Retail Consortium survey found was by far the biggest cost in its e-crime survey.
Search engine neutrality
It was recently suggested that I seek to organise a politicians' guide to Net Neutrality as it applies in the UK (e.g. Telcos allegedly discriminating against VOIP services and/or dictating which ISP you can connect over which service, as well as the various bandwidth rationing and "traffic management" processes at choke points). I strongly suspect I will be asked to include "Search Engine Neutrality" within the terms of reference. I will be interested to see the draft that the "volunteers" produce before it goes out for peer review. I will be even more interested to see the arguments over what they draft - and whether they can produce a guide that the major players agree is itself "neutral".
I suspect we may have to split the exercises but the cost, effectiveness and "neutrality" of Internet advertising appears to be nearly as interesting to small firms thinking of going on-line as the probability that they will receive payment for what they deliver and not get hit with charge backs after they think the payment went through.
P.S. I hope to persuade the Digital Policy Alliance to provide the umbrella for producing that guide on an all-party basis.