There are probably no hard and fast rules that define the boundary between the two but because BungeeBones attempts to bridge the two concepts I thought it a good idea to discuss what each of them are and are not.

As a general rule, link exchanges are small lists operated by individual webmasters. There is no minimal number of links, I believe, that needs to be reached for a list to be considered a link exchange so a webmaster is practicing the art of link exchange from the time of their first trade. Because they are small lists the vast majority of link exchanges are managed manually. The webmaster finds other sites they like, they contact the site owner, negotiate the trade, place the link in their site and may even verify their own link is, in fact, posted on the other site. The fruit of this endeavor produces convenience for a visitor (they don’t need to do a search for the other sites) and depending on the partner sites’ traffic, it will bring reciprocating traffic in as well.

The history of link exchanges goes back all the way to the beginning of the Internet. Since they are informal and grassroots arrangements there is no centralised repository needed and before the advent of large Internet companies it was the primary method used for traveling the Internet.

In our times they have still maintained their importance as search engines use them to conduct what would otherwise be a humanless assessment of a website by their robots. When they have their robots scan a site to profile it for their search engine lists they also check for incoming links to the site. Their theory is this – that if another seemingly valuable website has taken the time and trouble to place the site’s url in their own site it must be good. Unfortunately webmasters caught on and have had some success manipulating the search engines by creating “artificial” linking schemes to which the search engines, then, build algorithms to combat the perceived threat.

For that and other reasons link exchanges tend to remain, I believe, on the small side. Once a link exchange reaches a “certain size” (please don’t ask me what that size is as there is more debate about that than “taste great” and “less filling”) the search engines will start to pay attention to them (in a negative sort of way). My guess is that the search engines figure no “legitimate” website could ever get that popular to have reached that level of incoming links and therefore it must be a link scam.

Link exchanges are also size restricted, I believe, because they tend to draw in the new, low traffic sites, and don’t have anything built in to them to retain the successful sites that do develop from their midst. Once a site has built up its content and Internet presence it either doesn’t need the traffic the link exchange provides(for the amount of work involved) or it decides that if it is going to send traffic away from its site it is going to get paid for it (through something like Adsense or affiliate programs). Either way, linkechanges tend to be more like website incubators, growing websites until they become big enough to go on their own.

But link exchanges do grow with the right management and as they do they start to look more and more like small directories. Directories are nothing but lists of categories that enable a user to search through the alphabetical listings through the categories and sub-categories and sub-sub-categories etc to find websites with the information or product they are looking for. So one of the transitions a link exchange must go through, then, before it becomes a directory is that it needs to organize itself through the use of categories.

The birth of one of the largest internet companies, Yahoo, is the direct result of such a transformation from a link exchange to a directory. As the story goes, two now famous and very wealthy college students there at the very birth of the PC and the Internet started collecting links to other people’s webpages. As it grew users discovered how conveniebnt their list was and kept visiting their website to view the list. As they did word spread that if someone had a webpage they could and should also post it in this list. Well, needless to say, the rest is history and Yahoo went on to become the giant it is today. Yahoo started out very briefly as a link exchange and evolved or “morphed” into a directory.

So it seems the main difference between a link exchange and a directory is mainly a function of size. Along with size comes management problems which usually leads to some type of automation (forms and databases) and to quality control issues. Though the differences between directories and search engines is a different topic it might be good to note that quality control and the cost of maintaining that quality control is the main factor separating the two. The two main directories (Yahoo and DMOZ) are huge and are able to maintain quality of their list through the use of a huge human labor pool. Yahoo uses paid staff to review the listings and thus has to charge for inclusion in its list. DMOZ, on the other hand, relies on volunteers and therefore doesn’t charge but it sometimes runs into labor shortages which results in delays to new sites getting listed.

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Like anyone one else with a deep interest in website promotion I receive a number of newsletters on the topic. One of them regularly writes about the “evils of Pay Per Click (PPC) fraud”. When reading their material it always reminds me about how few that use PPC bother to calculate or monitor the return on their investment for PPC expenditures. To accurately calculate the ROI requires the webmaster to regularly compile some serious data comparing their sales, their traffic, and their PPC spending. A simplification of the analysis would be that if the expense of the PPC ad is represented by “X”, and the income directly attributable to the PPC campaign is represented by “Y” then the ROI is represented by (Y-X)/100. obviously, if the income from the ad is less than the cost of the ad there is no “Return” on investment but is a loss. To the webmaster concentrating on the ROI, click fraud, or the lack thereof, becomes totally irrelevant. A marketer armed with ROI information will invest their advertising wherever it will produce the highest rate of return.

Having settled the importance of calculating the ROI for a Pay Per Click advertising campaign in my own mind, the thought occurered to me that I had never heard or read of doing a similar analysis for a link exchange campaign. I am of the opinion that PPC is merely a brokered link exchange anyway, a type of link exchange in disguise, so I think the comparison is a relevant one. So whether I am going “where no man has gone before” or not, I decided to attempt such a study. Perhaps it may yield some concrete figures, or perhaps only guidelines, or maybe only ideas, or maybe nothing at all. Here are just some preliminary thoughts to get the process started.

• “Investment” doesn’t only include monetary investment. In link exchange (as well as PPC) there is an investment in time. Link exchnage, traditionally, has been a low monetary – high time investment strategy.
• The “Return” part of the analysis is also not enumerated monetarily. It includes the intangible (but measurable) benefit of increased traffic.

One thing that I see from the above two points is that link exchange is more likely to be used by non-commercial websites. The ROI of a Pay Per Click campaign for a non-commercial website is a big fat negative 100% (monetary).

That, in turn, reveals that both Pay Per Click and Link Exchange can produce the intangible benefits. In other words, a non-commercial website may simply be able to justify the expense of a Pay Per Click campaign by the amount of non-monetary benefits it derives from it.

In order to do an accurate comparison of the two methods (PPC and Link Exchange) it is important that we eliminate as many variables as we can. If we temporaily create an artificial division then within the PPC customers between commercial and non-commercial, and then compare the non-commercial users of PPC and Link Exchange we will have accomplished much of that goal. Later, we can attempt a construct of what a ROI comparison of a paid link exchange to a Pay Per Click’s.

Based on the above, we see that there is a big difference between the amount of labor generally associated with using the two methods (PPC and Link Exchange). There is, however, a large variance in the amount of labor that link exchanges require. Some are almost completely automated. ROI (whether monetary or not) can be increased by increasing the Return, decreasing the Investment, or a combination of both. The obvious conclusion then is that, if all other things remain equal, a lower labor requirement in a link exchange system produces a higher ROI than one requiring more labor. But by identifying this we can also see that automated link exchange may approach the labor input levels of PPC. Thus, for the Income part of the ROI equation Automated Link Exchange and PPC may almost be equal for the labor portion. Thus, we may have just eliminated another variable from our comparison.

That would leave us with just two-

• The amount of traffic derived from each method

• The financial cost

I said I would bring “Paid” link exchange back into the analysis and this looks like a good place to do that. Doing so would give us the following groups for comparison:

• Automated paid Link Exchange
• Automated Free Link Exchange
• Pay Per Click

What we need to look at now is the amount of traffic produced by each method. If this is an analysis for a commercial site then conversion factors can be used to calculate the monetary ROI. For non-commercial sites then a simple comparison of the cost of the traffic is complete.

The major difference between analyzing the traffic produced by pay per click and link exchange is the fact that the traffic produced by link exchange is unpredictable but infinite while that produced by PPC is metered and finite. Since in PPC the webmaster is, in fact, paying “per click” the more they are willing to pay the more traffic they will receive. The reason I say PPC traffic is finite isn’t because there is a limit on the amount of traffic that can be sent (from the PPC company) but rather there is almost always a limit on the advertising budget of the webmaster. If such is not the case then there is a theoretical equally infinite availabilty for traffic of both PPC and link exchange.

One aspect of ROI that has been left out of the equation so far has been the time element. In the business world ROI is usually expressed as an annual ROI. PPC ROI, on the otherhand, is often able to be calculated on a much shorter time interval.; perhaps even as short as instant. Most Pay Per Click companies let you establish a daily maximum spend. So after receiving a thousand clicks it is merely a simple matter of looking at the extra sales that day to calculate the ROI.

With link exchange, however, the results may not be that rapid. And once the initial investment in labor is made, it should be merely a matter of time before the return on that investment reimburses the webmaster for their time. That question “How long will it take for me to see results from entering a link exchange” is an often asked in link exchange forums. Once that occurs, the ROI for a free link exchange becomes a moot point. All the traffic after that point is free.

Paid link exchange (like Bungee Bones), on the otherhand, adds another layer to the analysis. The webmaster labor inputs (such as the requirement to conduct website reviews) are really just swaps between the webmasters and don’t add to the cost. For every review a webmaster does they receive the same amount from subsequent joiners, thus insuring a quality and inspection to the exchange that they would have to perform if they did their own independent link exchange. So if, for that reason, we can ignore the added labor input of site reviews, we can truly compare PPC to link exchange.

Bungee Bones offers two features that affect that analysis-

• an unlimited no-risk trial period
• variable priced categories

The no-risk trial is not a free trial but, rather, is a deferred-payment trial with an automatic debt-forgiveness if you never join the paid program. But since the paid program is also an income producing program, there is a likely probability that it will produce a positive financial balance rather than a deficit.The final decision by you whether to join is usually made after you have accumulated a large enough balance in your account to offset any debt accrued.

All the time during this trial period traffic is being sent to your site. That is in all respects, free traffic. So the “cost” per click then, is $ 0.00.

What then, is the ROI when the cost is $0.00???

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I would venture as a theory that PPC, at its root, is really just an expensive, managed link exchange. Through using it I let a PPC provider place my link on your site. If you also are using them I may end up placing your link on my site and getting paid for it. Obviously they don’t have to actually place the links on each of our sites but the illustration explains my point. Pay Per Click is really just link exchange brokerage putting together advertisers.

We know from their corporate profits that such a link exchange results in enough traffic to generate huge revenues. The ppc link exchange results in a cost of 50% to both websites because of the search engine’s cut. This is because in a privately arranged link exchange you get all the hits generated by the link (and they get all the hits to their site). Now if you got paid “per click” then once the click total reached the budgetary limit then the hits to their site would stop, EVEN IF you were still getting persons seeking the information. And yet demand for ppc keeps increasing. Isn’t this all an indication of the true value of link exchange?

Perhaps we  may be better to think of PPC as “metered” link exchange? The exchange is active only while the balance is positive, unlike regular link exchange where there is no meter running to eventually turn off the stream of traffic. BungeeBones is an “un-metered” link exchange.

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