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The Decline of Google's (and Everybody's) Ad Business
Hugh Pickens writes "Rebecca Greenfield writes that during their recent earnings call, Google reported a 16 percent decline in Cost-per-Click (CPC), meaning the value of each advertisement clicked has gone down. This follows a 12 percent drop last quarter and 8 percent the quarter before that showing an unfortunate reality of online advertising — unlike the print world, internet ads lose value over time. The daily and stubborn reality for everybody building businesses on the strength of Web advertising is that the value of digital ads decreases every quarter, a consequence of their simultaneous ineffectiveness and efficiency, writes Michael Wolff. 'The nature of people's behavior on the Web and of how they interact with advertising, as well as the character of those ads themselves and their inability to command attention, has meant a marked decline in advertising's impact.' This isn't just Google's problem. Overall, Internet advertising has decreased in value over the years as online advertising continues its race to the bottom. 'I don't know anyone in the ad-supported Web business who isn't engaged in a relentless, demoralizing, no-exit operation to realign costs with falling per-user revenues,' adds Wolff, 'or who isn't manically inflating traffic to compensate for ever-lower per-user value.' For Google's overall business, this loss doesn't mean as much, since it has since expanded its business beyond AdWords — including its recent acquisition of Motorola. For companies that didn't just buy big hardware companies however, it's a scarier proposition. Like Facebook, for example."
Adblock: Tragedy of the Commons.
It's amusing to see the commercialized internet compared to "the commons".
Sheesh, evil *and* a jerk. -- Jade
If each ad display has less value, maintaining revenue means being more agressive with advertisements.
Myspace tried that. That didn't end well. It didn't work out well for Yahoo, either.
Facebook is trying it now. That may not end well. One clear implication - Facebook stock is hugely overpriced. Based on current revenue, Facebook is worth about $7 per share. The stock price assumes a huge growth in revenue. Probably not going to happen. Even a slow decline in Facebook's revenue means the glory days are over.
Ads on search results are worth far more than ads on other media. Ads on search results are presented when someone is actively looking for something in the relevant category. Ads on content are irrelevant interruptions.
This follows a 12 percent drop last quarter and 8 percent the quarter before that showing an unfortunate reality of online advertising â" unlike the print world, internet ads lose value over time.
Or, alternatively, print ads were never really all that successful, but unlike on the Web, there was never any way to measure their efficacy with much precision.
You give yourself and human brains too much credit. It doesn't take that much to get into our subconscious, and into our decision making process.
http://www.youtube.com/watch?v=ZyQjr1YL0zg
Obviously, this Derren Brown video is a little dramatic and not very scientific, but the fact remains that we humans draw a lot of our "spontaneous" creativity and "rational" decisions from our surroundings. You may think that you're immune to the effect, but regardless of the amount of truth in an ad for ACME brand frozen lasagna, the fact that Morgan Freeman is telling you that it is delicious and nutritious will have an effect on your decision 3 months from now when you're deciding which brand you trust more.
And imagine how susceptible kids are.