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When Seth Godin called ads “the new online tip jar” –

If every time you read a blog post or bit of online content you enjoyed you clicked on an ad to say thanks, the economics of the web would change immediately. You don’t have to buy anything (though it’s fine if you do). You just have to honor the writer by giving them a click. You still get what you pay for, even if you pay with attention.

– hell broke loose in internet marketing circles –

That’s all fine and good, except that it screws the advertisers who end up paying for empty clicks and get a poor ROI. Ultimately, those advertisers get priced out of PPC advertising and there is less demand to run ads on the sites with great content that are getting all the thank you clicks. Yes, “the economics of the web would change immediately,” as Godin states. We’d go from a system that works to one where everybody would lose. (Shawn Collins)

For a big picture guy like Seth this a really stupid idea. For an experienced online marketing expert like Seth- this borders on criminal conspiracy. On successful sites people start clicking all sorts of ads. Good advertisers leave these sites in droves because the ROI drops out the bottom. Click Fraud becomes the accepted Standard Operational Procedure for people to do business on the web, if this becomes “an accepted online protocol.” (Chris Kieff)

As an advertiser I don’t like the idea of people who have no intention of buying a product clicking on my ads (or my clients ads). We set our prices according to ROI and we reduce prices when we stop making as much money - simple economics. We also ban ads from showing on websites that get lots of clicks but not a lot of sales. (Patrick Altoft)

I want to make sure that anyone advertising on my site gets value from it. High click through rates with no sales means I lose revenue in the long run. People at these real companies do the smart thing and track results of their paid advertisements. If a source isn’t paying for itself, it goes away. (The HR Guy)

The post also led to a “firestorm” in Seth Godin’s inbox, prompting him to write a rare follow up post –

My point was that if everyone started clicking, clickthrough rates would go up. For a while, there’d be an imbalance, and sites would make too much and advertisers would pay too much.

But then, advertisers would use the landing pages to start converting. They’d adjust to the new status quo, to seeing a stream of happy clickers who came through because they liked the page they were on. And they’d get better at converting those folks (something that doesn’t happen now, because only the hardcore click through). Do you see the benefit? If more people convert, the budget goes up. The spend can increase because converting mild interest (which they don’t see know in a rare-click world) into sales is profitable.

I think the most robust ad environment for the web is one in which more surfers give permission to more marketers to make their case. And one way to get that permission is to have a culture in which surfers agree to “pay” attention in exchange for great content.

Even though I love the delicious subversiveness of the idea, I agree with the SEM folks. I have done CPC advertising both as a blogger and a brand manager and I have always had zero tolerance for websites (or keywords) with high clicks and low conversions. If clickthrough rates go up and conversion rates drop, marketers would shift ad dollars to search, away from content/ placement, and ad budgets available to bloggers would drop, instead of going up.

Seth Godin’s “more clicks -> lower conversions -> better landing pages -> higher conversions -> higher budgets” hypothesis assumes that marketers can learn to design significantly better landing pages to convert disinterested (or mildly interested) leads. I’m not sure if I share his confidence.

Update: Ex-Googler Sumant Srivathsan pointed out in the comments section that –

The other major catch in this hypothesis is the belief that ‘only the hardcore’ currently click through. If this were true, we’d be seeing much higher conversion rates than we currently are.

Marketers who do CPC ads are often happy to get conversions rates that are in high single digits or low double digits, so, clearly, not everybody who clicks an ad is motivated to buy the product or service. Thanks, Sumant.

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