• Silicon Alley Insider, Friday, July 18, 2008 2:45 PM

Google faces a tough challenge in the coming months with regards to its ads quality initiatives. In previous quarters, the search giant dialed down the number of ads it displayed, as well as scaled back on the number of publishers it allowed within its AdSense network.

"Google has reduced the number of keyword ads on results pages by more than 40% in the past 6 months from an average of 6.5 ads to 4 ads," according to AdGooroo's Richard Stokes. And while the measures were taken to improve the quality (and ultimately CTRs) of search ads, the decrease in volume has started to drag down revenues. So what's the company to do?

Stokes says Google can raise ad volume by about 20% in the coming quarter, but that's about it. After all, both searchers and advertisers have become accustomed to less ad clutter. "Presented with more ads, it's hard to know what the conversion rate will be," he says. "Advertisers will have to accept a lower rate, and it could take time for bid rates to adjust."

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