• Marketwatch, Friday, January 5, 2007 10:45 AM

Google keyword prices are soaring, returns are diminishing and click fraud is still an uncontained problem. So many small-to-midsize advertisers say they plan to do less business with Google than in years past. Some plan to reduce spending significantly.

For example, retailer eBags.com, which depends on search engines and shopping-comparison sites to drive traffic to its site, spent between $5 million and $8 million with Google last year, with more than 75% of that figure going to the search giant. Said CEO Peter Cobb, "The Google percentage has got to go down."

Why? Keyword costs for certain retail items have skyrocketed in the last few years. Cobb says the cost of an ad on Google.com or one of its AdSense affiliates now equals up to 45% of the cost of the product it promotes. With competition for ads reducing profit margins so dramatically, smaller advertisers are forced to at the least, diversify their ad spending. For eBags, elsewere is print.

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