Wednesday, February 27, 2008

The real reason Google's clicks are flat

From SEO Black Hat:

Google reduced the clickable area on Adsense text ads ... Before, a user could click anywhere on the ad and be brought to the
destination. After the changes, users have to click on something that looks like a hyperlink.

"The CTR on text ads declined about 60% in the last 2 months with Googles changes, Image ads on the other hand stayed the same."

- January 4th, 2008 Marcus of

4 months later, that little back and forth in the Google Rec Room shaved about $85 Billion (with a B) in market capitalization.

But it wasn't as stupid an idea as it might seem. You see, Adsense works in a Quasi-market place environment. The market will bid up the cost per click once the adjustment for accidental clicks is readjusted. Right now, marketers should be getting a better value per click as a higher percentage of the clicks are "real" or intentional. That will lead to higher bids per click and ultimately should be close to a break even for GOOGs bottom line.

Is the Sky Really Falling?

The problem is that in the interim, GOOG gives almost not Guidance to the stock market. Mutual Fund types are really too thick to grasp exactly what's going on, so they think that this "slowing" in the growth has to do with the potential recession effecting GOOG.

Meanwhile, the real story is that Online Advertising Spending will continue to grow at about 30% per year for at least the next 3 years and GOOG is poised to take a disproportionate amount of that growth even if nothing else they do is even marginally successful.

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