Google Sacrifices Clicks To Increase Advertiser ROI

By Jason Lee Miller - Mon, 03/03/2008 - 18:53

Wall St.'s CPC panic might be premature

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/

News Tags: Search, Advertising, Google, Financial, CPC

About the author:
Jason Lee Miller is a WebProNews editor and writer covering business and technology.

54 Comments

By Baby Pushchairs (WPN reader) - Mon, 04/13/2009 - 02:40

Running test ad as image ad

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?

By Super exotic sports cars (WPN reader) - Sun, 03/29/2009 - 04:41

Long Tail Keyword Phrases: Increase Search Engine Page Position

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

By Guest (WPN reader) - Tue, 02/24/2009 - 08:48

Google will always laugh to the bank

Google's Adwords getting expensive every day. The way it goes and goes is absolutely pathetic! No wonder they are making so much money.
How to make money fast on the internet

By منتديات (WPN reader) - Sun, 12/28/2008 - 15:55

good

thanks For You
It`s gret Job

By دردشة (WPN reader) - Wed, 10/22/2008 - 03:20

You really need to get a

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

By online shopping facts (WPN reader) - Sat, 08/30/2008 - 17:18

great articles

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

By Neon Signs (WPN reader) - Wed, 08/06/2008 - 09:08

Well I for one applaud

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

By Breckenridge real estate (WPN reader) - Tue, 02/10/2009 - 00:00

Google Reducing Publsihers earnings

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.

By Jeff Brown (WPN reader) - Sat, 07/26/2008 - 05:28

Google pay per-click

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

By eurodipity (WPN reader) - Fri, 07/18/2008 - 05:25

Options

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.

By Ruben Zevallos Jr. (WPN reader) - Mon, 05/19/2008 - 12:08

Google charge too much

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.

By Guest (WPN reader) - Thu, 05/01/2008 - 00:24

Google

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

By Tom (WPN reader) - Mon, 03/31/2008 - 18:35

Google ads

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?

By Page Rank Info (WPN reader) - Fri, 03/28/2008 - 23:46

Advertisers pay the money,

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.

By Rick (WPN reader) - Tue, 03/11/2008 - 04:25

Google BOT hits Up but my sites Google Search Hits down

Hello

I am Both PPC advertiser and publisher.

here are some stats for you as seen by me a publisher

already Google BOT has scraped my site
with 48,000 hits for month of March 2008 alone

for the entire month of February, 2008
Google BOT hits were 148,000

I am always glad when Google feels that they need to scrape my site as my site has helped many people get listed and found on Google in a matter of only days - but lately I am no so sure. It seems that Google has pushed my site way down the list of important sites on there search engine but only after they scraped grabbed all of the relevant information that my site has collected over its 7 plus years online. I have been watching the above occur for the last 6 months with a real hard hit in January. I did a bit of redesign and resubmitted my site for a recionsideration after I noticed a No Page Rank after having a rank of 4 for years. Right now I rank at 3.

How can I tell google has dropped me down the list of important sites?

well for the first time ever Yahoo and MSN rank over Google for search engine traffic coming to my site

Last Month - February I had 6500 links in from Google and 1800 from Yahoo and 1800 from Windows Live

This Month, March, so far I have links in as follows
Windows Live 633, Yahoo 533, Google 333

so at this rate traffic in from Google searches will be only be 1300 to 1400 for the month of March, 2008

I have also noticed more relevant searchs in my business catagory on Google when I do my search tests and my site had fallen from front page to 5th or 6th page hence the lower traffic in from Google. So it would seem to me that Google has scraped my my site for their benefit and then dropped me and shoved me down the list of important sites in my catagory.

Now it is not that my site does not have relevant listings. If I did not why would Google scrape it so much.

I run a link site and it has grown on its own from Day one and only if someone added their link to the site. It is still important enough to get 1500 to 2000 visits a day and 400,000 page views a month even with out Google

I have never jammed the Google ads right in my customers face and hence a lower click rate for ads running on all of my pages.

But after watching what I have been watching of late I am thinking of going Ad Free for my entire network - 100's of related sites - as it really has not been that much of a money maker. I only really ran the ads to off set what I spent on ads. So, Yes, if you must know if I go ad free I will also stop running the ads I run.

If you are wondering what the site is
www.BeadLinks.com

and with 25 years in the Bead Business BeadLinks.com is not just some Bead Site Jammed onto the web for the Goggle clicks alone it is a real Bead Service site that should be higher up on Google's List of important sites

Rick

By Guest (WPN reader) - Wed, 07/23/2008 - 11:51

Sorry ,but site looks ugly

By phwoody (WPN reader) - Wed, 03/05/2008 - 15:13

Google ads.

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....................

By Guest (WPN reader) - Mon, 03/31/2008 - 18:38

google ads

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!

By Guest (WPN reader) - Wed, 03/05/2008 - 16:35

Hey look I thing that if you

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

By phwoody (WPN reader) - Wed, 03/05/2008 - 17:47

idiot

Grow up.

By Boot (WPN reader) - Wed, 03/05/2008 - 16:08

Nothing new.

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.

By Hyena Cialis (WPN reader) - Wed, 03/05/2008 - 11:46

G oogle won't admit

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+.

By Guest (WPN reader) - Tue, 03/04/2008 - 17:43

Google's decreased clicks

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."

By Guest (WPN reader) - Tue, 03/04/2008 - 17:34

google adwords

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

By Guest (WPN reader) - Tue, 03/04/2008 - 17:32

Google majority of the clicks is a robbery

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.

By Mayo (WPN reader) - Tue, 03/04/2008 - 17:19

In-Out of adwords

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

By Guest (WPN reader) - Tue, 03/04/2008 - 16:25

For me google clicks don't

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

By Guest (WPN reader) - Tue, 03/04/2008 - 16:15

No organics - no adwords

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.

By Guest (WPN reader) - Mon, 07/07/2008 - 13:39

SEO

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.

By Pest Pro Joe Pest Control (WPN reader) - Tue, 03/04/2008 - 16:19

Why give it for free if someone will pay?

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.