Despite any concerns about click fraud (see previous post), pay-per-click advertising has become a marketing phenomenon with exceptional growth in spend being reported over the last 4 years in Australia and the UK, in particular. First developed as GoTo, this early PPC model rebranded as Overture in 2001, by which time Google had also launched its AdWords product and it has been this tool that has driven the growth in this market (and Google's revenues) over recent years.

PPC has been so successful because it has focused the power of search engine traffic into a controlled advertising model. We've compared the strengths and weaknesses of PPC v SEO, but a key advantage of PPC is that companies can easily achieve visibility on search engines, whatever their site design or optimisation may be like, and it can create highly relevant and cost-effective traffic for them within 24 hours. The 'pull' method of advertising means that people will find a company or product when they are actively looking for them, rather than the traditional offline advertising that 'pushes' a message out to a broad market using TV, press or radio.

This use of search can be so cost-effective and measurable that companies are now falling over (or, perhaps more correctly, out bidding) each other to get rankings through sponsored results. Consequently the average cost per click has been increasing over the last few years due to the increasing competitiveness of many market sectors, so that the huge success of PPC advertising is also now beginning to create barriers for many.

The entry costs for a PPC campaign are now becoming higher and many larger companies are now entering the PPC market to dominate rankings with higher bid levels, both to drive traffic and develop their brand, as well as to push competitors down the rankings. This process will begin to shut out those companies with smaller budgets, although there are still many ways to make this form of advertising successful.

Eventually PPC advertising will achieve a natural economic balance and advertisers will need to ensure that their websites convert visitors at a better rate to continue to achieve the best ROI (return on investment). There are some signs of a move back to search engine optimisation as a strong alternative to PPC costs, although we recommend a balance of both techniques to achieve the best opportunities for search traffic.