Pay per click.

Article in the Post today on pay-per-click, as practiced at Google, and it's an interesting view into the finances of free sites like Google. Advertisers will pay the site for each person who clicks on an ad (and not, as used to be the case, for each person who sees the ad), and Google auctions off the right to have the ad placed on the first page of hits ("auctioning" here representing the per-clickthrough rate paid by the advertiser). The highest click-through payment is around $30 for "mesothelioma," an asbestos-caused cancer, paid by people hawking legal or medical help.

One of the interesting points is the art of determining the differing value of similar search terms - "digital camera" goes for 75 cents while "digital cameras" goes for $1.08, because advertisers have found that customers using plural terms in searches are more likely to end up as buyers. And another is that Gateway spends millions of dollars every quarter bidding on search terms. Perhaps that helps to explain Gateway's $6 million loss in the first quarter of this year.

As a consumer, I'm not sure I see the value of sponsored links and prime placement on search pages. Although I purchase a fair amount online, I've never purchased anything through a sponsored link, and just plain don't trust them. But I guess that advertisers are hoping that not everyone is as cynical about such things as I am.