Will Marketers Get Frugal With Google?

It depends on who you ask.
The latest data from comScore showed that clicks on ads placed on Google didn't change much from January 2007 to January 2008. Clicks were actually down 12% from the last three months of 2007.

Clicks on Yahoo! ads also fell 3% from the fourth quarter, but it was Google that got all the unwelcome attention, including a stock price dip to about $450, down from about $740 in November.

What is going on?

BusinessWeek quoted UBS as saying in a research note that "unless there's a problem with comScore's data, the most likely scenario is that 'advertisers are simply bidding on and buying fewer keywords.'"

eMarketer senior analyst David Hallerman also said that an economic slowdown would likely mean less online shopping for consumers, and therefore fewer clicks on the ads that direct them to retail sites.

But Mr. Hallerman says that marketers should not overreact to the comScore data.

"You typically need multiple data sources to get a clear picture," he said. "Even if the comScore data is perfectly accurate, one month is not enough to view a trend."

And there have been differences between comScore's click data and Google's reported results in the past, according to a J.P. Morgan research note cited by The Wall Street Journal.

For that matter, Hitwise says that the percentage of traffic going from Google to retail (shopping) sites is actually increasing. Since the bulk of paid search advertising is shopping-related, the Hitwise data gives a far different picture than the comScore data.

Google also changed its technology to reduce accidental clicks, which could reduce the number of paid clicks, but could also make those clicks more valuable to marketers in the long run.

"Remember, too, that Google tends to be a black box when it comes to its internal technology," Mr. Hallerman said. "Therefore, much of what is being written about the impact of any potential reduced clicks is, at this point, more speculation than fact."

No search advertising crisis seems imminent. Taking the economy into account, eMarketer predicted last month that search ad spending would nearly double to about $16.6 billion in 2011, from $8.6 billion in 2007.



In the meantime Google dominates the market. It draws far more search users and search requests—and therefore search ad revenues—than all its rivals put together. An eMarketer estimate shows Google raking in 75% of US paid search advertising in 2007, up from 60% in 2006.

Get the long-term view on search marketing. Read eMarketer's Search Engine Marketing: User and Spending Trends report.