Google Sacrifices Clicks To Increase Advertiser ROI

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.
Editor's Note: It's hard to think of a time in history where an advertiser actively sought to decrease the number of referrals coming through the system. Perhaps it should be considered that Google is working to qualify buyers the way offline salespeople do. Is this a positive development? Give us your thoughts in the comments section.
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. Add your comment. "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%."