Last week I described the Search Engine Strategies Conference in London. This event allowed me to unearth the secrets of a subject that's become increasingly important to e-commerce sites: pay-per-click advertising.

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All major search engines now permit sites to appear near the top of particular search results by paying a fee. The largest pay-per-click service, Overture.com (formerly GoTo), feeds the ads of its two top-paying customers into the results of AltaVista, AOL, Ask, DirectHit, Excite, Go, HotBot, iWon, Lycos, MSN, Netscape, and Yahoo. The third top-paying client also appears in the third position in all those engines except Netscape. The fourth and fifth ads appear only in six engines, and so forth.

I've often wondered how important it is to pay for the top spot. Because the No. 1 position often costs much more than No. 2 and No. 3, wouldn't the 2nd and 3rd positions be more cost-effective?

One answer, based on the actual historical experiences of advertisers, comes from Dave Carlson, the CEO of GoToast.com. GoToast provides an automated bid-management service that adjusts a Web site's ad spending to keep its ads in position No. 1, 2, or 3 in Overture and 18 other pay-per-click vehicles.

In GoToast's study of ads in positions 1, 2, and 3, Carlson found the following number of visitors, conversions, and return on advertising dollars:

Position Visitors Conversions Return on Ad $

1 100 1.24% $2.16

2 64 0.51% $1.36

3 73 0.63% $2.59

In the above chart, for every 100 visitors who clicked ads in position 1,

64 clicked ads in position 2, and 73 clicked ads in position 3. Interestingly, advertisers who paid to be in position 3 actually received a greater number of visitors and a higher percentage of conversions than ads in position 2.

More important, ads in position 3 provided a much higher ROI than ads in position 1 ($2.59 for every $1 spent versus $2.16).

"If everything's equal," Carlson says, "the third position is the most successful." Carlson speculates that visitors who click an ad found in position 3 are more ready to buy something, perhaps after having examined the sites advertised in positions 1 and 2. In addition, it costs fewer cents-per-click to keep an ad in position 3 than in position 1, making the return even higher.

My guess is that a well-written ad in position 3 will often out-pull a mediocre ad in position 1. My own surveys of click-throughs in the "Top 10 News Picks" section of E-Business Secrets show that my readers are just as likely to click News Pick 9 as News Pick 3 or 1. People don't merely click the first thing they see. (News Pick 10, on the other hand, tends to get about 30 percent more click-throughs than the others, probably because I usually select as News Pick 10 something humorous or offbeat.)

I'll continue this discussion of pay-per-click advertising and how your site can get the best results for the fewest advertising dollars next week.

GOTOAST.COM MANAGES BIDDING ON PAY-PER-CLICK ENGINES:

http://www.gotoast.com http://bri.li/?4e5a

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E-BUSINESS TECHNOLOGY REVIEW: HOW TO SPOT A BLACK BOX

If your job involves evaluating new technology, you'll learn a lot from reading a very chilling story. According to the Florida Times-Union, a Florida man talked giants like Intel and Blockbuster Video out of more than $6 million for a breakthrough invention that may not exist.

Madison Priest of Palatka, Fla., demonstrated a "magic box" that could transit audio and video at blazing speeds over ordinary telephone lines, says the Times-Union. Unfortunately for investors, who were not allowed to touch the demo unit, one of the "power cables" emerging from a power strip contained a hidden coaxial cable -- the same kind that easily transmits cable television.

There's much more to learn in the article itself. It makes a great detective story, and it may save you a lot of money some day.

IS IT A "MAGIC BOX" OR A HIGH-TECH HOAX?

http://www.jacksonville.com http://bri.li/?756a

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LIVINGSTON'S TOP 10 NEWS PICKS O' THE WEEK

1. Opt-in newsletters hit by rampant Klez virus

http://www.contentbiz.com http://bri.li/?422

2. U.S. sites will be taxed on software sales to Europe

http://www.globetechnology.com http://bri.li/?80a

3. File-sharing boosts music sales, Jupiter study says

http://www.news.com http://bri.li/?bf2

4. Printer makers fight refill sites that halve prices

http://www.cnn.com http://bri.li/?fda

5. Adult sites draw 1/3 of users, but profits are down

http://www.siliconvalley.com http://bri.li/?13c2

6. Let visitors send SMS recommendations of your site

http://www.promotionbase.com http://bri.li/?17aa

7. HTML coder reviews Weblog tools, Moveable Type wins

http://hotwired.lycos.com http://bri.li/?1b92

8. How developers choose languages for different tasks

http://www.joelonsoftware.com http://bri.li/?1f7a

9. Upgrade your Flash player now to avert hack attacks

http://www.computeruser.com http://bri.li/?2362

10. Don't touch that dial! Copyright theft! (hilarious)

http://research.yale.edu http://bri.li/?274a

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WACKY WEB WEEK: GIRAFFE PRIVACY RIGHTS TRUMP DISCLOSURE

I'm all for the privacy of medical records, but this is ridiculous. The National Zoo in Washington has refused a journalist's request to see the medical records of a giraffe that died, saying that releasing the records would violate the animal's "right to privacy."

Even animal rights activists said the decision was mind-boggling, because it places a nonexistent "animal privacy" right above the rights of the public under the FOIA (Freedom of Information Act).

Washington Post writer James Grimaldi gives a laugh-out-loud description of the case in his article (see below). But he fears that the zoo will cancel his family membership when the piece comes out.

ZOO DECLINES FOIA REQUEST DUE TO GIRAFFE PRIVACY RIGHTS

http://www.washingtonpost.com http://bri.li/?c38a

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E-BUSINESS SECRETS: Our mission is to bring you such useful and thought-provoking information about the Web that you actually look forward to reading your e-mail.

ABOUT THE AUTHOR: E-Business Secrets is written by InfoWorld Contributing Editor Brian Livingston (http://SecretsPro.com). Research director is Ben Livingston (no relation). Brian has published 10 books, including:

Windows Me Secrets:

http://www.amazon.com http://bri.li/?0764534939

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http://www.amazon.com http://bri.li/?0764534130

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