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Google Sacrifices Clicks To Increase Advertiser ROI

Wall St.'s CPC panic might be premature

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Google investors are still at the table eating their losses after comScore’s report that paid click revenues were flat in the month of January. Impending recession was the chief suspect among speculators, but nobody finds any real support for that. More astute observers noticed that revenue flattened very soon after webmasters began reporting on decreases in AdSense earnings.

Remember that? I’m sure you do. Our readers had lots and lots to say about it, and posed lots and lots of theories, again with the economy as the prime culprit. But what if I told you that revenues were flat and Google appears to think that’s a good thing? It’s all about the quality of search ad real estate, baby.

A leading theory is that Google decreased the clickable area of AdSense ads in order to cut down on accidental clicks. They did that about mid-November, just before some publishers noticed a drop in earnings, which was just weeks before comScore released a report saying AdSense revenues had flattened.

If decreasing the clickable area of an Adsense ad is the direct cause, why would a smart company like Google do such a thing? The answer posed for that question is that Google plans to make it up by creating a higher value on the clicks that do not happen accidentally. This could be a win win win for Google, Adwords buyers and Adsense partners, as referrals cost more, but are more likely to convert.
 

ComScore also believes that the flattening in January revenues is due to a new Google strategy to raise the value of clicks, i.e., fewer clicks for more money.
 

In lieu of economic causes, comScore’s Magid Abraham and James Lamberti write, "The evidence suggests that the softness in Google’s paid click metrics is primarily a result of Google’s own quality initiatives that result in a reduction in the number of paid listings and, therefore, the opportunity for paid clicks to occur.

"In addition, the reduction in the incidence of paid listings existed progressively throughout 2007 and was successfully offset by improved revenue per click. It is entirely possible, if not likely, that the improved revenue yield will continue to deliver strong revenue growth in the first quarter. Separately, there is no evidence of a slowdown in consumers clicking on paid search ads for rest of the US search market, which comprises 40% of all searches."

So even though there were fewer clicks in 2007, Google made more money. It looks like they’re trying to repeat that in 2008.

Bill Tancer at Hitwise similarly found that if declines in revenues were economic-based, or an indicator of recession, then Google traffic to retail sites might be among the first hit. However, Google traffic to shopping and classified sites was actually up year over year.
 

No slowdown among RimmKaufman clients, either, says Alan RimmKaufman. "Across our clients, comparing February 2008 to February 2007, we did not observe evidence of an advertising or sales slow-down: median same-client Google ad-spend was up 22% year-over-year, and corresponding same-client resulting PPC sales were up 26%."
 

In fact, measured by their share of RimmKaufman’s clients, Google is 5½ times bigger than Yahoo, and 750 times larger than Ask.com.

EfficientFrontier also presents unfathomable numbers from among its clients. Among them, Google pulled in 76.6% of total search spend, and, get this, 97% of the extra money advertisers allocated for search last year.

That’s interesting considering other numbers show that MSN shows the highest return on investment, while Google’s is the lowest. If so, why is Google grabbing so much of that share? Well, you’ve probably already answered: Sheer numbers. Google runs 2/3 of the search market.

And that gives them the leverage to inflate one area while deflating another. Investors are already nervous about Google getting away from its core competency—search advertising. Ensuring as much revenue in that area as possible is a good business move. While Google’s chief economist Hal Varian contends that "there are very small costs of switching to an alternative search engine for users, advertisers, and publishers," the reality is that switching could cost a lot in lost traffic. But it was a nice try at convincing us.

And so it becomes relatively clear why Google leads the other search engines in CPC inflation (22% versus less than 3% from Yahoo and MSN): because they can.

Google has also decreased the number of ads that appear on search results, making that real estate that much more valuable. Google is killing two birds with one stone: increase the quality of search advertising while increasing revenue. All that said, we’re betting Google’s Q1 report will have some surprisingly positive numbers—and if their stock price still goes down it might be safe to say BUY, BUY, BUY!

More Stats:

ClickForensics (which makes its money from fighting click fraud, mind you, reports that the overall industry click fraud rate rose to 16.6%, up from 14.2% the year before.

Click fraud on AdSense and Yahoo Publishers was 28.3% in Q4 2007, up from 19.2 percent the year before.

ComScore reports the percentage of Google pages with at least one ad on them dropped from 52% to 48%. Paid click rate declined by 8% from .24 to .22.

Google’s worldwide revenue increased 68% in 2007. Revenue per paid click increased 21%.

EfficientFrontier says its clients enjoyed a 12.5% increase in click-through rates in Q4 2007.

MSN brought in 27% higher ROI than the other two big search engines last year.

One advertiser reports Google AdWords ads crush Facebook content ads. Google: 15,386 impressions; 688 clicks; 4.47% CTR. Facebook: 225,875 impressions; 178 clicks; CTR 0.08%.

EfficientFrontier’s LeeAnn Prescott submits: In December 2007, CTR on Google search was 31 times greater than on Google’s content network (AdSense), at 2.14% for search and 0.07% for content… CTR on AdSense has dropped by 75% over the past year, even while content spend grew 39% among the same group of clients.

PlentyOfFish’s Marcus Frind submits: The CTR on text [AdSense] ads declined about 60% in the last 2 months with Google’s changes. Image ads on the other hand stayed the same.  If you take a screen shot of a text ad and then run it as an image ad it will get 2 times the click thru rate.
 

Sources:

http://www.comscore.com/blog/2008/02/why_googles_surprising_paid_click_data_are_less_surprising.html

http://googleblog.blogspot.com/2008/02/our-secret-sauce.html

http://weblogs.hitwise.com/bill-tancer/2008/02/google_does_search_data_indica.html

http://efrontier.com/efficient-frontier/resources/research/docs/SearchEnginePerformanceQ407.pdf

http://blog.efrontier.com/insights/2008/02/google-becoming.html

http://blog.efrontier.com/insights/2008/01/click-through-r.html

http://blog.auinteractive.com/facebook-ads-dont-work-heres-proof

http://www.rimmkaufman.com/rkgblog/2008/03/03/feb-2008-ppc-share/

http://plentyoffish.wordpress.com/2008/01/04/how-to-advertise-on-adsenseplentyoffish/

Google Sacrifices Clicks To Increase Advertiser ROI
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  • http://www.cpresumes.com Guest

    I think Google should stop ripping advertisers off. Everyone knows they make BILLIONS and to hear that they reported flat earnings makes me sick.  I pay them over $300 per day in clicks, and sometimes lose money.  $4 to $5 per click is absolutely rediculous.

    • Guest

      I agree with you. It is too expensive to advertise on Google. We pay about $0.60 per click. Only 15 cents on Yahoo. And results from Google is terrible. CTR looks high from their statistics. But we do not receive orders. We are a small business. I use to spend $600 a month on Google. Now I cut it back to $100 a month. Not sure if other advertisers are the same as us.

      • http://www.sensibleweddings.com Sensible Weddings

        I agree with everybody. ROI for Google Ads plummeted starting in November 2007. Thus I have cut back drastically in advertising. When Google fixing what they broke, we will be happy to begin our campaigns at full force again. Meanwhile,  we will find other venues to sell our bridesmaid jewelry, personalized gifts, garters, and more.

        • Guest

          you dumb cunts you really need to get a real life and start doing in front of people instead of like some scared ass pussies Or I forgot you were born without a spin

          • phwoody

            You really need to get a life, and learn how to spell.

          • http://hurricanemarketing.net Under the Sun Emporium

            Where did that crap come from? I don’t even know what that means. Maybe you should get a life and get out of the discussion. Your input isn’t wanted.

            As for the Google PPC subject, I can’t even afford Adwords. I hate bidding on anything. I want a reasonable flat rate. CPC bidding wars leave the small-timers out in the cold. I have resorted to Free Viral Marketing sites like TrafficSwarm.com . You earn advertising credits by clicking on other ads. I honestly have found some great services to help me run my business and at the same time getting my own ads seen. No, I didn’t get paid to say that. I just like the site.

             

          • http://www.almcsolutions.com Lea Charlton

            OK, I am LMAO but what I want you to answer … do larger companies like Starbucks, Microsoft and such use Traffic Swarm? Unless some affiliate is promoting them, I am not sure that they do, though I could be wrong. Let us know.

          • Jason Lee Miller

            I assume the anonymous heckler meant “spine” … and that he has no idea how ironic his post is…getting a life and anonymously calling people cowards…just goes to show you we should find a way to speed up natural selection

    • http://pestprojoe.com Pest Pro Joe Pest Control

      Google is taking their margins for sure.  In fact, I find that I don’t make any money on a lot of advertsing I do with them and I am lucky to break even.

      …. what’s worse is what Phone Books try to pull. 

      I think mass marketing has lost its pull, and Google will find themselves headed for the same end if they only focus on what they get out of the relationship.

       

    • Guest

      If you really are losing money with Adwords… then stop using it.  Sheesh.

    • http://www.cpresumes.com Guest

      We are a resume writing service, and sometimes do good to break even in Google click charges. We pay nearly $5 per click, and for a resume service that is not a high demand industry, it is hard to stay afloat when your advertising per day costs more than what you earn per week.

  • Guest

    Adwords is not a good value at all — people are leaving it in droves — Google inflated and maxed out each of the vertical categories — and now they are over priced – Adwords buyers want conversions not clicks — and there is plenty of "odd" traffic coming thru. We shut down almost all of our clients adwords accounts — meaning, stopped wasting money for non converting traffic…

  • http://www.amazinglaserbrush.net Guest

    Greedy…..Never thought Google would get like this.

    I started using ad words 2 years ago and gladly spent $400 to$900 a month and had a good ROI . However the ROI went down to almost nothing and the keyword cost is sky-high !

    Imagine $10.00 for a keyword that use to be .05 cents!!  Half of my keywords are $5.00 or more minimum.  What a shame Google became such a pig . You will lose you faithful customers like me that helped make you so successful.

    If anyone at Google actually reads this (which I doubt ) pull up my account ,You have my URL and you will see the many Thousands of dollars I have spent.    JR

    • blobabubu

      there is a simple fact, its pure greed after money. this guys simply think they dont have enough billions.

      after a while they will find out, they cant eat more kaviar, buy more diamonds, aircrafts, ferraris etc.

      what will they do ? they will take their shxt money with them into the grave and maybe they think they will be happy there, by cheating others. they are wrong !! but they reached peters principle and are blind from now on until they get doomed, they wont be the first, remember IBM, DEC etc.

    • Guest

      I started to spend €1500 month and 4 years ago and untill the end of the last year for less results we were spending €25000 yes 25tousand euros a month, we started to verify everything and we arrived to the conclusion that 80% of the clicks are generated by sites that have nothing just our advertisment as sedoparking domainsponsor domainlanding there are people buying domains just to make money with the adsense.

      We recomend that everybody should stop using adwords or google stop with the adsense for certain people and sites

    • Ed

      You are right, Google became too greedy and will lose some publishers. They remind me of Ebay. The only difference is that Ebay raises fees and Google cuts commissions…

      But you are wrong about them losing "faithfull customers".

      You see, you are not their "customer". You are more like a "partner".

      Their customers are advertisers and what Google is doing will keep their real customers happy.

       

       

      • Guest

        who really gives a crap you guys all complain but can’t or don’t have the balls guts or backbone to do anything about it so shut the hell up or step to the problem and handle you big sissy la las

        • CAGE FIGHTER

          How old are you?  8?  were u breast fed?  You are a momma’s boy, arencha?  Fair enough…

          • phwoody

            I second that, go and find some porn to look at, your obviously reaching the puberty stage.

          • Jason Lee Miller

            heh…says the anonymous heckler

  • http://www.lonelyplanetexchange.com Guest

    I used to spend over $1,000 a month on my adwords account.

    This lasted until I realised Google had no intention of listing the pages organically, but would rather keep taking the money off me for paid listings.

    After 2 years, my pages are still not listed on Google, even after re-inclusion requests, and even though they are the only up-to-date source of flight surcharges in the UK which can be as high as $40 for some flights.

    QED

    Google weren’t really interested in listing my pages.

    I’m not really interested in advertising with them.

    • http://pestprojoe.com Pest Pro Joe Pest Control

      I don’t care what Google has in writing about being a non-profit organization.  Its all about the money.  I have come across the same thing.  My site stays about the same position on Google no matter what I do.

       

       

    • Guest

      You might want to consider hiring a company that can do SEO for you.  These companies are able to bring you better positions for organic search within about 6 months.

  • http://www.bestcreditrates.net Guest

    For me google clicks don’t convert at all,  my min bid is $2, and I need 70 click for it to convert. .

    ——————————————

    http://www.bestcreditrates.net

  • http://penisenlargementforsmallpenis.com/index.php Mayo

    I started Adwords campaigns months ago, I was slaped many times,tried to build relevant landing pages,I got plenty of clicks,BUT no sales?,.

    I forgot Adwords,until now,I am going to try a new aproach,maybe grey hat.

    Adwords sucks, a lot of competence drove the PPc up…

    mayo

  • Guest

    After 4 years advertising with google we have notice that clicks are every day more expensive, we have words now that the minimum it is €8 incredible.
    but worse it is that the majority of the clicks is generated by sites that do not bring business as sedoparking etc etc it is a robbery.

    Put a good tracker at your site and you will see that 80% of the acess generated by google adwords come from sites that do not bring any business it is just a lost of money from advertisers

    Advertisers should make a brake and verify the results coming from Google adwords.

     

  • Guest

    Hmmm, interesting to say the least. I have only used google adwords on one occassion that resulted on zero sales. I believe I spent $200.00 on a campaign. I have found yahoo search marketing to be more affordable with good results myself.

    http://www.HollywoodTeen.net

    http://www.GuitarHeroGamePlanet.com

     

  • http://www.way2hope.org Guest

    Glad, but not surprised to hear Google made money.  As usual in the PPC discussion, no one at Google seems concerned about how their strategy is working for us Adsense publishers.  On  cpm basis, our adsense revenue is about 1/3 what it was a year ago.  Our sites are getting more valuable in terms of traffic, but their ads are getting less.  If this is not corrected soon, I’ll be looking into selling my own ad space.  Personally, I think their purposely reducing the number of clicks is a huge violation of "Do no evil." 

  • http://www.hyenaonline.com Hyena Cialis

    G oogle still don’t admit that their earnings are flatening…

    It has so much hype about their ego and now their stocks
    fell sadly from $800+ to $400+.

  • http://www.turnkeykingdom.com phwoody

    I have just had the pleasure of being banned from Google’s Adsense program. I have been a publisher for over a year with no problems and then bang, got up yesterday morning and my account has been disabled.

    Apparently i pose a risk to their advertisers and publishers alike, bull***t, i have done nothing different to what i always have done, i lost my appeal and now have to redesign the sixty or so websites that had been built around adsense ads. This is how Google treats the little people now, i know i am not alone, perhaps this is how they do business with the little people like me, wait until you have built up a high amount of adsense earnings and then say without reason, you pose a threat, we are terminating your account and you won’t be paid anything.

    No proof or explanation as to why i now pose a risk, i now think the mighty Google are nothing but rip off merchants who prey on little people like me knowing that they can get away with it.

    Lets hope Google will fall as quick as they rose, greed, greed, greed, money, money, money.

    Lets hope there is soon another company that will take the mighty greedy Google down a peg or two………………..

    • Boot

      Google has done a lot of evil.   They don’t even give you valid reasons why the boot you.  Their fraud algo. is a joke obviously and unfortunately a lot of people have been banned from using their services.  Adwords’ quality score is a joke.  Keywords are expensive.

      Google wants to rule the world in an evil way.   That’s why I am cheerleading Yahoo and Microsoft like there is no tomorrow.  Google needs some good competition and an attitude adjustment.  Too much abuse. 

    • Guest

      Hey look I thing that if you think that supostly google needs to knock down a peg or two why don’t you do it instead of typing about it you  big mot***f***** Or are you just a stupid cunt

      • phwoody

        Grow up.

    • http://www.webpronews.com Guest

      You getting your paycheck? I got shutoff today also.  Gues they need some extra money that they feel they don’t have to pay for services either.  They owe us both our monthly check at least!

  • http://www.webtacs.net/page-rank/ Page Rank Info

    Advertisers pay the money, not the publishers. They have to make sure that the clients are happy, and that they will come back and buy more CPC ads.

  • http://www.webpronews.com Tom

    I feel the same way ph woody felt about being shut down. I found out today, the last day for payment.  Good way for them not to pay you, even for services you earned.  No different then working for someone and not paying them. Google wants to drop you then tell us and pay us for us services also. 

    That’s a bunch of crap and this guy also had a year under him.  But not having to pay you is a s—w job.  Why not shut me down tommorrow on the first.  Use our 50 sites to promote thier clients and then not pay us.

    I’m not happy with this and they need to be turned in for not paying.

    This is my full time job and the heckler don’t realize the hit.  Does he got stock in Google?

     

  • http://www.renaware.org Guest

    Google can do what they want. Well, they rule the Net dont they.

  • http://www.direito2.com.br Ruben Zevallos Jr.

    I think Google is too gready as other readers said… Why Google have words for about US$ 3 or 10? And also, the result is very small comparing other on-line marketing…

    If Google do not change it´s price practices, I´m sure lot´s of customers will move to other kind of on-line marketing… My customers did lot´s of complains about the Ad Works results… and and o offered other options… they like more, because the ROI was times better.

  • Guest

    Enjoy your new life.

  • http://eurodipityhotels.com eurodipity

    There are a lots of  promotions programs out there, if Google adwords it’s too expense, them use another one, I don’t see any problem.

  • Guest

    Sorry ,but site looks ugly

  • http://www.tlctowing.net Jeff Brown

    When someone can figure out what it is google wants let me know.

  • http://www.neongear.com Neon Signs

    Well I for one applaud google for trying to improve conversions and click throughs!!

    • http://www.mrbreckenridgerealestate.com/ Breckenridge real estate

      I have noticed that so many bloggers starts to write more on weight loss and real estate niche just to get more related site displayed in their google ads. It might help to get higher earnings but the competition is high as well. It is good to monitor competition level before going after any keywords.

  • http://www.swankigifts.com/article/shopping online shopping facts

    I enjoy reading your stuff.  Another great article with alot of great facts jason.

  • http://www.maas1.com ?????

    You really need to get a life, and learn how to spell.

  • http://forum.5voq.com ???????

    thanks For You
    It`s gret Job

  • http://www.yugocars.com Super exotic sports cars

    Short tail keywords are typically one or two letter keywords that are both highly popular and very competitive. Long tail keyword phrases on the other hand usually involve three to six word phrases but at times can include even more.
    ==>> Pintu

  • http://www.babypushchairsonline.co.uk/index.php?cPath=3 Baby Pushchairs

    It is brilliant to come up with the idea of capturing text ad as image and run it as a image ad. I wonder is this allowed? Will Google impose a penalty for doing that?

  • http://www.88sourcecode.blogspot.com Anjaneya

    i don’t know much more about googel roi but is it wright way to follow adword. i did so many time as much i have knowledge. i lose money on that but no use…

  • http://www.resumeservice.com Brian

    I agree. We’ve gotten no traction on our resume service keywords for months now!