Google: How Do You Like Me Now?

Thursday, April 17, 2008 By Clay | Comments (0)

Google shares are up over 15% in after hours trading (brace yourself for tomorrow) after reporting Q1 earnings, blowing away estimates and fears that the search giant could disappoint due to a reported slowdown in gross paid clicks (thanks again Comscore).

The highlights:

• Revenues increased to $5.19 billion up 42%
  
• Net income increased to $1.31 billion up 30%
  
• “Our ongoing innovation in search, ads and apps helped drive healthy growth globally across our product lines, yielding another strong quarter for Google,” Chief Executive Eric Schmidt said in a statement

Henry Blodget, the leading paid click disaster wolf crier, has more coverage.

Comments (0) | Categories: Search Engine Industry News | Tags: earnings, GOOG, google    |  Popularity: 80% [?]

Panamania! Yahoo To Test Google Ads

Wednesday, April 9, 2008 By Clay | Comments (0)

In an attempt to explore alternatives to the Microsoft deal and/or entice MS to increase their offer, the Wall Street Journal is reporting that Yahoo will run a small test of Google ads on their site.

From the WSJ:

” Yahoo Inc. said it will carry search advertising from Google Inc. as part of a test effort that could lead to a broader partnership and boost Yahoo’s leverage in its ongoing takeover standoff with Microsoft Corp.

The test will last up to two weeks and involve no more than 3% of Yahoo’s Web search queries, the Sunnyvale, Calif., Internet company said. It is designed for Google and Yahoo to evaluate the revenue potential of a broader search ad sales outsourcing arrangement, according to people familiar with the matter. They have been discussing such an arrangement as part of Yahoo’s pursuit of alternatives to Microsoft’s unsolicited acquisition offer. Yahoo views the latest test partly as a way to demonstrate its belief that it is worth more than Microsoft has offered, one of the people says.”

Google, Yahoo, and Microsoft have all commented on the news.

More coverage and analysis:

• Techcrunch: Yahoo Provokes Microsoft With Google Adsense For Search Trial
• Search Engine Land: Confirmed: Yahoo To Test Google Ads
• Mashable: Yahoo Close To Search Advertising Deal With Google
• AP: Microsoft’s Official Comment
  

Comments (0) | Categories: Search Engine Industry News | Tags: adsense, google, microsoft bear hug, yahoo    |  Popularity: 85% [?]

GoogleClick’s First Product: Google Ad Manager

Thursday, March 13, 2008 By Clay | Comments (0)

Coming off the heels of the DoubleClick acquisition approval, Google has launched their first DoubleClick-enabled product; Google Ad Manager. The free service, currently invite-only, allows publishers to easily manage their ad inventory and better service ads on their site. From the Google site:

“Directed at addressing the ad management and serving needs of publishers with small to medium-sized sales teams, Google Ad Manager is a free, hosted ad and inventory management tool that can help publishers sell, schedule, deliver and measure their directly-sold and network-based ad inventory. Google Ad Manager provides an intuitive and simple user experience with an easy tagging process so publishers can spend more time working with their advertisers and less time on their ad management solution. And, Ad Manager helps publishers maximize their inventory sell-through rates by providing detailed inventory forecasts and tracking at a very granular level.“

This approach is very similar to what Google did with Urchin, taking a relatively expensive and robust service and making it freely available to everyone. At the moment this isn’t the DoubleClick suite but don’t count out an integration of advanced features at some point.

What does this mean for search marketers? I believe the acquisition of DoubleClick and the launch of this product are critical pieces to the next phase of Google’s growth and the evolution of search advertising. If this service is widely adopted, it could serve as a catalyst for more precise targeting and ROI management.

Here are my thoughts on what we could see from this in the next year or so:

• More AdSense Volume: I anticipate a windfall of more AdSense volume as not only will publishers do a better job of managing their ad inventory (there’s a yield optimization feature built in and text links typically outperform banners) the remnant inventory (ad inventory that goes unsold) defaults to Google AdSense. We should also see better targeting as Google can incorporate more data based on the user’s behavior (see below).
• Higher AdSense CPC Prices: It’s very possible that with more efficient ad serving it will cost more to receive impressions from targeted websites and beat out effective banners. Publishers who previously only ran AdSense because they didn’t have the time or resources to implement ad serving technology will now have an easy solution that will allow them to experiment with ads in other formats and from other networks. This could also impact volume (so much for the first bullet).
• Behavioral & Re-Targeting Features: Could Google start charging a premium for visitors who match a specific behavioral profile? Particularly if they can show you that visitor converts at a higher rate? Absolutely. We may not pay a premium but Google will certainly incorporate the behavioral data and publishers will benefit the most. Re-targeting (Ad.com calls it ‘LeadBack‘) will certainly be a hot topic as Google’s in a prime position to show ads based on what the user has searched for in the past. This alone could be the carrot to get publishers to sign-up.
• Personalized Search Ads: Additional behavioral data will enable Google to add more data points to their ad serving algorithm. We should see more personalized search ads that are not only served based on the keyword but also the website the visitor previously visited and/or ad they previously clicked on.

There are certainly more implications, let me know by posting a note in the comments.

Additional Reading:

• Google’s Ad Manager Official Site
• Official Google Blog: Our solutions for ad serving
  
• TechCrunch: Google Enters The Ad Management Game
• Wall Street Journal: Google To Offer New Ad Service For Publishers
• Search Engine Land: Google Ad Manager Targets Medium-Sized Publishers, Seeks Broader AdSense Distribution
• VentureBeat: Google Ad Manager allows direct slaes of ads, Adsense fallback
• Mashable!: New Google App Provides Free Ad AManagement
• The Paradigm Shift: Google Admanager (should be a good discussion)

Google AdManager image copyright Google, Inc.

Comments (0) | Categories: Search Engine Industry News | Tags: ad manager, google    |  Popularity: 95% [?]

Making Sense Of The Google CTR Debacle

Wednesday, February 27, 2008 By Clay | Comments (4)

I’m amazed at the logic (or lack thereof) behind the recent sell-off of Google stock amid Comscore’s report of flat YOY January paid search click-through rates. The press and blogosphere has been buzzing with stories ranging from sensational (Google Disaster: Comscore Reports Awful January Data) to simply inconsistent (Google Shares Fall 8% on Ad Fears). Many stories went as far as using Comscore’s questionable data point as an indicator to Google’s susceptibility to US market conditions. Here’s a review of what happened and my take on why we should be rolling our eyes.

What Happened?

Comscore reported January 2008 click-through rates on paid search ads remained flat in comparison to January 2007. Let me repeat that, CTRs on paid ads on Google.com remained FLAT. Not traffic declined, not revenue per click declined, not net profit declined, and certainly not EBITDA declined. Is this worth raising an eyebrow? Sure. Is this worthy of a knee-jerk reaction that results in a 4.6% decline in the stock and billions of market cap value? Absolutely not.

What Could Be Causing A Deceleration in CTR Growth?

A deceleration in CTR growth may be a signal that Google’s paid advertisements are seen as less relevant to searchers. While there are a host of factors that could cause this, I think two in particular are playing a significant role; Google’s expanded broad match and paid search marketing campaign maturation.

Before jumping into each factor, there’s also a macro element at play; the long-tail of search. Search engine users tend to evolve from using one keyword per search to using two, three, and four keyword phrases. As they get more experienced using search engines they tend to use more keyword phrases (eMarketer muscle). These longer keyword phrases represent more fragmented keyword inventory (we move from ‘flights’ to ‘cheap flights to miami’) and a longer tail of keyword volume. This evolution is playing a role in the two (potential) deceleration factors:

• Google’s Expanded Broad Match: In recent months Google has been very aggressive with their expanded broad match feature.Google will take an advertiser’s ad targeted to the keyword ‘flights’ and display it on searches for ‘trips’ – a practice that’s very difficult for advertisers to control.Google has taken upon themselves to help advertisers reach the long-tail keyword queries they may not have included in their campaigns.While this delivers additional volume it also produces less relevant ads for searchers and lower click-through rates.
• Paid Search Marketing Campaign Maturation: As search engine campaigns mature, managers expand their keyword lists to find more and more search volume (more eMarketer muscle). They tend to venture outside of keywords within their primary keyword market (‘cheap flights’) and move into keyword phrases that reach their target market but may not elicit a direct response/conversion (’luggage’).This activity, particularly for large advertisers who can afford to do it on a large scale, means less relevant ads for searchers and lower CTRs.

Some other theories require a bit more data which isn’t available. I’d love to know if…

• Paid search ads are becoming more and more commercial. With CPC’s rising, are less and less content focused advertisers being pushed out by commercial/commerce focused advertisers who can attribute a direct ROI?
• Organic results, particularly Google’s move to blend images and video into results (universal search) is affecting paid search CTRs. Could the move to blend video into paid ads change this?

In summary, there are a number of factors at play causing the (potential) deceleration. Two in particular involve the long tail of search and how advertisers capitalize on it. And while this is potentially causing a deceleration in CTR’s it’s not necessarily a bad thing for Google’s bottom line. Which leads me to…

Why You Shouldn’t Get Too Excited About Comscore’s Report

Google has many ‘levers’ they can pull to improve quality and increase revenue. While CTR on sponsored links is certainly looked at, it can easily be manipulated and I highly doubt it’s one of their KPIs.

To illustrate a lever, Google has a minimum bid and CTR threshold for an ad to qualify for the premium position (top left above the organic results). Ads that appear in this premium position receive extremely high CTR’s; well above the norm. Now, if Google was concerned about CTR (to the extent where it should be used to evaluate the health of the business and influence financial analyst buy/hold ratings) they could easily lower the threshold and allow more advertisers in that space.

Why doesn’t Google do this? Because CTR isn’t a primary KPI. Revenue (in addition to user experience metrics that encompass ‘quality’) is and with their continuous market share growth they don’t need to worry about CTR. A simple illustration:

If this was your search engine, would you like period A or period B? If A was January 2007 and B was January 2008 (yes, I accounted for the 85% YOY search query growth) would you be as concerned about Google’s health let alone their susceptibility to the market slowdown? I think not. The sell-off has created nothing but a bargain for savvy buyers.

Thoughts?

UPDATE (2/29): Comscore has released their explanation here. Very much in line with my thoughts. Choice quote…

“We generally do not comment on industry data that we release because we are expected to provide information and not opinions. However, the conclusion that was being drawn about the softening of the online advertising market, while at first glance is supported by a data sound bite like a “drop in paid clicks”, does not hold water once you dig deeper into the more detailed information provided in the paid click data. Left unchallenged, it harms the interests of the overall Internet industry. That is why we took the unusual step of writing this note.

It is important to emphasize that we are not repudiating our own data. Quite the opposite: our data remains unchanged, and, we believe, correct. We are just offering a more thorough analysis to ensure the information is interpreted correctly and that the proper conclusions are being drawn from it.”

Related reading:

• Google Watch (2/29), It’s Google, Not The Economy, Stupid
• Clickz (2/29), ComScore Weighs in on Google Click Volume Debacle Sparked by Its Data
• Barrons (2/29), ComScore: Weak Paid Clicks Reflect Google Policy Shifts
• Techcrunch (2/29), Google CTR Down Due To Click Area Changes
  
• Silicon Alley Insider, Google Disaster: Comscore Reports Awful January. Choice quote, “Yes, Comscore could be wrong, and, yes, it’s only one data point. But hard to imagine how the bulls are going to spin this one.” And the link to Google Bulls Try to Spin Comscore Disaster, Fail doesn’t seem to be working.
• New York Times, A Highflier Loses Altitude as Google’s Clicks Go Flat. A well balanced piece.
• NYT/Reuters, Google Shares Fall 8% on Ad Fears. Choice quotes, “UBS analyst Benjamin Schachter cut his 12-month target on Google from $650 to $590 — a new low among bullish Wall Street analysts”. Followed by, “Schachter maintained his long-term buy rating on Google. The UBS analyst also noted that comScore had recently revised the way it measures visits to Web sites, which made comparisons to previous trends difficult.” Huh?
• Seeking Alpha / Techcrunch, Did The Market Overreact To Google’s Paid Click Decline. The best read of the bunch. The correlation analysis from JPMorgan is particularly interesting.
• Fred Wilson, Thinking About GOOG This Morning. Always a pragmatic approach.
• Hitwise Intelligence, Google: Does Search Data Indicate a Recession? An alternative data perspective.

Comments (4) | Categories: Search Engine Industry News | Tags: comscore, google, industry news    |  Popularity: 37% [?]

Google’s ‘I’m Feeling Lucky’ Being Used For Email Spam

Friday, February 8, 2008 By Clay | Comments (0)

MSNBC’s red tape chronicles blog written by Bob Sullivan has an interesting piece on how Google search engine results pages and their ‘I’m Feeling Lucky’ feature are being used by email spammers.

“With traditional spam finally losing traction among e-mail users, spammers have stepped up their pace of innovation. Last year, they adopted new techniques like image spam, .pdf spam and even audio spam. These disappeared as quickly as they came. But starting in January, spammers began flooding inboxes with a new kind of spam that uses a much simpler form of deception. In the body of these e-mails, recipients see what looks like a link to Google search results — and in fact, that’s what it is. There’s trouble, however, on the other side of that link.

The attack combines two tactics. First, spammers game Google so the Web site they want recipients to visit ranks at the top of the search engine results. Second, they alter the URL pasted in e-mails so users who click on the link go directly to the top result via Google’s “I’m Feeling Lucky” feature – bypassing a stop at Google’s Web site.”

Apparently using a legitimate Google link bypasses spam and phishing filters. Google, always on top of their game, said they’re already working on stopping this.

“A Google spokeswoman who asked not to be named said the company has seen “I’m Feeling Lucky” attacks, but added that help is on the way.

“Google began deploying a fix that should block most of these ‘I’m Feeling Lucky’ redirects, and we will work to reduce such issues in the future,” she wrote in an e-mail.”

Full story, New Cyber Trick: Search Engine Spam.

Comments (0) | Categories: Search Engine Industry News | Tags: google, spam    |  Popularity: 20% [?]