The San Jose Business Journal ran an article yesterday about a new study that shows many businesses are paying too much money to maintain a top ranking on the pay-per-click search engines. Pardon me for saying it, but "duh".

Researchers at the Stanford Graduate School of Business found that web site owners, driven by the competitive environment of an auction style advertising system get easily carried away and end up bidding more for a phrase than they can actually afford.

Rather than paying the amount they've bid, however, in the current auction system advertisers are charged only a penny more per click than the next lowest bid, with some adjustments that depend on the quality of the ad.

This encourages some advertisers to bid as much as they are willing to pay for the ad, rather than simply what it is actually worth to them, the study's authors say.

It goes on to suggest that search engines could solve this problem, if they wanted to:

The study authors suggest that if the auctions were structured differently, they could be more beneficial to those who advertise.

Again...duh. Let's make it clear that search engines are not altruistic companies...they are interested in making money. If a business owner gets caught up in making sure their ego is satisfied with a top position and loses track of the bottom line that is the return on their investment, that's not the search engine's fault. It's called poor money management.

It wasn't that long ago that I covered this topic in the article: PPC: If You Aren't Number One...You Still Get Customers. Could have saved those researchers some time and energy if they'd read it first...