Google--not an economic recession-is to blame for paid click growth slowing to a virtual halt in January and February. For starters, Web users aren't performing fewer searches. Meanwhile, Google
rivals Yahoo and MSN showed paid click gains in the first two months of the year, during which time Google actually increased its share of the search market. Did users simply decide to click less on
Google ads than they did on Yahoo and MSN? Probably not.
Even comScore, which compiled the January and February paid click analysis, conceded in its most recent report
that the downturn in clicks was most likely due to Google tweaking its advertising system. Google executives also revealed that the company was trying to improve the quality of its ads.
How does it do this? Firstly, by showing fewer ads per page. Why show fewer ads? Google is aiming to reduce visual clutter, which pleases both users and remaining advertisers. Second, Google is
trying to weed out those bottom-feeding advertisers that consistently bid low. Low bids indicate that advertisers don't expect their ads to generate many clicks. Google wants to get rid of those so
that the remaining advertisers pay more for higher quality clicks that drive more business and convert more often.
The x-factor is whether or not higher quality ads cause users to click more
often. We'll find out on April 17, when Google delivers first quarter earnings.
Read the whole story at The Economist »