• by April 2, 2004

Following an announcement on Gmail that was apparently not an April Fool's Day hoax, Google got back down to business. Specifically, the business of pricing. The search provider said it will change the pricing structure on the ads it places on partners' Web pages.

Advertisers will be charged less for words that don't deliver decent consumer conversion rates. The move also implies that Web publishers will see lower revenues, which could be devastating to online publishers that are just beginning to the market pick up. Google serves ads based on words consumers type into its search engine, and also ads based on words that appear on Web sites within its content advertising network.

Why did Google decide to rejigger pricing now? Timing is everything, particularly given the company's impending initial public offering. Google must have received enough feedback from advertisers that are paying good money for key words that aren't delivering conversions. Google says that advertisers want search-based versus content-based ad campaigns priced differently.

I'm wondering whether the new price structure will make the ads Google offers more relevant? For its part, Google has strenuously and repeatedly said that user relevance is its goal, mission, and mantra. Whether these changes will allow it to adhere to this principle while also meeting the demands of advertisers, remains to be seen. As with anything else, we'll wait and watch. The more troubling impact of these changes will be born by publishers, all of which are dependent on search advertising revenue. If there was a time to diversify revenue streams, it's now.