PPC pulls the banner down

   By the end of 2000, when the Internet bubble burst, banner advertising had
acquired a really bad reputation. Billions of dollars had been spent on banner
advertising, and most of it was wasted. Click-through rates — the proportion
of ads that are clicked upon — for banner ads were very low, and many
advertisers, perhaps most, spent more on the ads than they made on any
sales derived from them.
Banner ads had several problems:

- They were expensive. Although CPMs were typically $35–$50, because
   only one ad impression in 200 resulted in a click, that often translated

   into a price of $7–$10 per click.
- They had low click-through rates (the ratio of ad impression to actual
   clicks on the ad), which made them expensive. People were sick of
   seeing them, so they learned to just ignore them.
- Conversion rates were low. That is, only a small percentage of the
   people who clicked a banner and arrived at a site actually bought
   anything.
- They were in the wrong places. Ads were often placed in front of
   people who simply wouldn’t be interested in the offer, which meant
   people didn’t click them much.


Which brings me to another critically important characteristic of PPC ads as
opposed to the majority of banner ads — PPC ads are, often, placed in the
right place, while most banner ads were in the wrong place. As you discover
in this book, there are lots of different types of pay per click advertising, but
the concept really took off when it was incorporated into search engines, and
search engines’ results pages are the right place to put your ads.

The first big move in PPC search advertising was made by GoTo.com, a company
founded by Bill Gross’ IdeaLab. (IdeaLab has had a huge effect on the
Internet, from eToys to CitySearch, NetZero to PETsMART.) In the summer of
1998 the company began selling ad “bids” on the GoTo search engine; you’ll
learn more about bidding in a moment. The company changed its name to
Overture, went public, began a partnership with Yahoo! and late in 2003 was
purchased by Yahoo!. (Yahoo! is now in the process of re-branding Overture,
calling it Yahoo! Search Marketing.) By the way, in the early days this form of
advertising was often known as CPC — Cost Per Click (but I’ll be sticking to
the form that’s more common these days, PPC, in this book).
Here’s the basic concept of PPC advertising: Rather than placing banner ads
on various destination and content Web sites, when you buy PPC ads, most

are placed in search results. If you’ve searched on the major search engines —
Google and Yahoo!, and MSN — and most smaller search systems, too, you’ve
seen them: small ads that appear above and alongside the search results. In
fact, the search results page contains two types of search result.