Google Promises More Revenue with Fewer Clicks

A BusinessWeek article entitled, "Google's Gamble" (http://www.businessweek.com/technology/content/mar2008/tc20080328_837834.htm?chan=search), describes Google's reaction to a comScore report demonstrating a diminishing number of clicks on its search-related ads early this year. The report, which led to much speculation about the value of Google stock, left Google banking on the potential of each click to result in sales for advertisers. In keeping with its efforts to act as a "partner" to search-related advertisers (including the vast array of options to gauge the success of ads before business-owners commit to an advertising spend), Google is working to increase the quality of clicks. By focusing on the potential of its ads to drive sales with fewer clicks, Google is essentially taking on more of the risk in the publisher-advertiser partnership in order to maintain its stake among business owners like Ross Twiddy, who comments, "What we care about is not just traffic but that it translates into vacation rentals." Google is backing its plan by making changes to its ad layout to minimize the effects of accidental clicks. If its efforts to adjust the gauge by which advertisers often measure the effectiveness of a campaign from the number of clicks to their quality, the company will be able to charge a higher premium for placing search-related ads:

"The idea is that, as marketers and small business owners such as Twiddy see more clicks translating into paying customers, they will value clicks more and ultimately increase the amount they bid per click to offset the reduced volume of clicks. Indeed, Google has reported that the price per click on most keywords has steadily increased as it has improved the quality of those clicks."

Exercising its considerable power in the search-related ad space, Google's endeavor to magnify the role of the publisher in ensuring revenue to the advertiser may initiate a shift in the value proposition of competitors. If nothing else, it draws attention to the innovative efforts of the company to maintain its profitability in the face of the recent economic slowdown.