Google ad weakness actually sign of strength

When traffic tracking outfit comScore released numbers Monday that seemed to show an ongoing slowdown in Google’s ad clickthrough rates, it sent a shiver through the market and had every pundit and his dog speculating on the reasons, with most concluding that the slowing economy was finally starting to drag on the Net’s highest flier (see “Google stock looking a tad peaked“). After the fuss, the comScore folks took a hard look of their own and now have concluded that what looked like bad news may not have been so bad after all.

In a blog post today, comScore CEO Magid Abraham and senior VP James Lamberti contend that the dropoff in clickthroughs is likely the result of Google’s own efforts to filter out low-quality ads. “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,” wrote Abraham. “In addition, the reduction in the incidence of paid listings existed progressively throughout 2007 and was successfully offset by improved revenue per click. … Separately, there is no evidence of a slowdown in consumers clicking on paid search ads for rest of the U.S. search market.” Furthermore, says Abraham, an improvement in the quality of ads wouldn’t necessarily translate into more clicks; in fact, the opposite may be true. “If the ads are more relevant, consumers would need fewer clicks to get what they are looking for,” he wrote. “Perversely, a high number of clicks means that the ads are not delivering what the user is looking for on the first try, which induces additional clicks on the second or third try. The benefits to marketers are real, but also counterintuitive. If the users get to what they want with fewer clicks, it means those clicks have a higher conversion rate, or deliver higher quality leads.”

So no need to get overly worried, right? Henry Blodget still has his doubts: “This week, as analysts have rushed to check in with search engine marketers, we have heard reports of weakness in financial services, real-estate, and other categories. Although Google’s click improvement programs are almost certainly contributing to the paid-click fall-off, it seems unlikely that they account for all of it. We therefore continue to view the comScore report as supporting the theory that Google is exposed to economic weakness.” Knowing first-hand that public comments don’t necessarily reflect private conversations, Blodget is also wondering if the comScore execs had any discussions with Google before coming forward with a more favorable interpretations of the numbers.


Share this Post