• by Tameka Kee , March 4, 2008

Fresh off a week of doubts about the resilience of Google's paid and natural search value proposition, one of the giant's top engineering brass aimed to still the hearts of financial types feeling antsy over declining ad clicks and a slumping economy.

"If an advertiser knows that they'll make five dollars by spending one dollar, the chance is high that they'll spend it," said Alan Eustace, senior vice president of engineering & research at Google. "We've stressed measurability and providing a clear return on investment since we started our advertising business--and the growth of paid search shows that advertisers have bought into that. That's what will help us in times like these."

Eustace addressed attendees at the Morgan Stanley Technology Conference in Dana Point, Calif. on Monday, acknowledging that as a relatively young company, Google hadn't experienced a true recession--and that the market would have to, in a sense, "wait and see" what future performance would look like.

But Eustace said that there were factors that made Google more resilient than other ad providers in the industry. In addition to attracting advertisers from across verticals, "our business is geographically diversified across the world in fast-growing, medium and stable markets," Eustace said.

As for the declining clicks--most recently reported by comScore, but also by Google itself, during its fourth-quarter 2007 earnings release--Eustace reiterated that the decrease stemmed from algorithmic improvements on the ad-serving end, as well as the reduction of clickable space for AdSense ads.

"It would have been easy for us to avoid making those kinds of changes, or just increase the number of ads," Eustace said. "But we made choices to reduce the number of advertisers and decrease accidental clicks, because the changes deliver better information to users and make them click more in the long run."

Eustace added that while clicks had decreased, advertiser conversion rates were much higher--partly due to the giant's requirements that many advertisers improve their ads' landing pages. "It's a shared revenue stream between us and the advertisers, so they've been equally motivated to improve the user experience," he added.

When it comes to organic search, Eustace said that the market is still very competitive. "If a bigger, better alternative came out, people would use it," he said. "So our engineers are not feeling fat, dumb and happy because we feel like we don't have to work at search. Competition could come from anywhere, and we work hard because we need to meet user expectations."