« Lamport's Bakery Algorithm | Main | Who will stop Google from going to 90% market share? »

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 Plentyoffish.com

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.

Comments (16)

Seems like a good move for GOOG in the long run since it provides better value to advertisers. If they're not seeing a positive return everyone's screwed.


Not just mutual fund types... predictably, the BBC fails e-comprehension: http://news.bbc.co.uk/1/hi/business/7266676.stm

Even though I have a lot of Google stock, maybe it's not a big deal if the price fluctuates randomly up and down for spurious reasons. I certainly doubt the change in number of paid clicks has anything to do with the economy, especially since Google went out of the way to call out in their last conference call that they were making changes that could affect "accidental clicks". In the long run, Google has shown that they know how to grow their monetization. So even if there is a drop in revenue for the quarter, as long as it's a result of conscious decisions within Google, rather than external forces, it's likely good in the long run.

The bigger question is: if it turns out this particular click rate issue is all spurious, does that mean the stock price will go back up? It doesn't have to. Sometimes people are just looking for excuses to sell, and if it's not one thing, it would be something else.

But I'm not selling any time soon at these prices, that's for sure.

Well this illustrates the importance of "knowing your customers". The idea that streamlining clicks is somehow seen as negative is ludicrous. Surely all the investors should be able to work out that it is better to have a few convertable clicks than many accidental and non-convertable clicks.

Another big piece that everyone in the media is missing is that Yahoo! Search changed their TOS preventing many publishers from sending bought traffic to their ad feed. Much of their arbitrage traffic went away, and Google was the source of much of that arbitrage traffic. But that was a mid Feb. item, so that might be in next month's analysts report. :)

Around Feb 10th, I noticed Google was serving mostly graphic ads which were slowing my site down. I replaced the text/graphic ad blocks with text only. The result was NINE days without a single click. I then replaced the text/graphic ads again. Ten more days without a click. The "new" graphic ads can't be clicked! The visitor has to locate the advertisers URL written in 6 point type below the ad to visit the advertisers site and record a click. This amounts to trickery on Google's part. People are getting free advertising because the visual impact of a graphic ad sticks in the visitor's mind. here I am promoting advertisers on 50 plus web pages and for what? Absolutely nothing - that's what!

Google has lost the plot. The search engine is useless, and now the ads are too.

Goggle is obviously the market leader, however, I see their ads placed on websites so often that I don't even see them any longer.

It's like my mind has trained itself to just ignore them.


So that explains why my adsense revenues have gone down by about 40%

I cannot see the difference as I am just building an adsense income. I must say it is starting off slow, however it is growing a small amount every week.

It is wrong to have an image ad that you cannot click on! That's what people are used to. They will try to click on it and it won't work..Are they going to look into it further or move on?? I say they will move on.

Google will notice this and have to change because the advertisers want people to go to thier sites.

Takoma Bibelot:

Good call on Google's part. I always felt this was akin to eminent domain misappropriation of real-estate. Too often an accidental click on "white space" led me to ads I didn't want to see. Frankly, this was one of the key reasons I installed CustomizeGoogle and turned off the ads. Will I turn them back on now that the barn door is closed? Nope, too late.

At least this is a perceived loss instead of a real one. Unlike Fridays stock market dive.

Completely off-topic, but...

Did anyone else misread "clicks" as "chicks"? It surely piqued my interest!

Have you noticed the tests with the medium rectangle lately? Google is putting a scroller control the bottom left corner, you can now scroll the ads and help them out by clicking ton that high priced one...


hm.. I read `the real reason why google's chicks are fat'

go figure..


Great piece of info, Rich. As always you come up with stuff I missed. I really appreciate your posts.

One thing that you didn't mention... probably helps reduce invalid clicks. I can't estimate how many times I've clicked on an adsense ad accidentally.

To be honest when i now go to sites with google adsense on them. I do not acknowledge them and i believe that if they have them on the site they diminish the integrity of your sites.

Post a comment

(If you haven't left a comment here before, you may need to be approved by the site owner before your comment will appear. Until then, it won't appear on the entry. Thanks for waiting.)


This page contains a single entry from the blog posted on February 27, 2008 2:14 PM.

The previous post in this blog was Lamport's Bakery Algorithm.

The next post in this blog is Who will stop Google from going to 90% market share?.

Many more can be found on the main index page or by looking through the archives.

Powered by
Movable Type 3.33