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From lectures, we learn about the keyword-based advertising that Google and other search engines have. This way of advertising turns out to make $10-$20 billion per year, creating a massive market that companies fight over through an auction called the Generalized Second Price auction. This auction follows the idea of second-price sealed-bid auction for multiple slots for ads, with the first slot priced the highest. These ads are based on a Cost-Per-Click model, which means that an ad that links to a company’s Web site is shown every time a certain query is made and the business pays the search engine when the users click on those links. This is because the act of clicking ads on search engines indicate intent on the users’ part, and intent means potential business or sale for that company.
There are some objections to the cost-per-click model, such as click fraud, where people may hire others to click on their links all day long without intent. But it seems that Google may improve from the click model towards the Pay-Per-Action model (PPA). Incorporating the PPA may either flop horribly for Google or make the ad slots more valuable if people show further interest into purchasing products from the advertising companies by actually using the companies’ sites for purchases and business transactions. This also reduces the chances of click fraud, making Google’s customers less reluctant to bid on ad slots.
Furthermore, Google plans to serve fewer ad slots. To some people, it may sound crazy but Google thinks it may raise the slots’ values and allow more relevant ads to show up, which in the long run, might make users trust and click on the ads more.
All this will probably make Google the even more favourite of all search engines and the cost-per-click model we talked about in class may well be ancient history in world-wide-web time soon.

Here’s a blog post on the same subject.