Slashdot Mirror
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."
The ads were getting a bit overwhelming. Maybe this will mean less of them.
The 1% don't eat nowhere near as much Doritos as the 99%.
Yay! They've finally clogged the pump of consumerism!
the preceding comment is my own and in no way reflects the opinion of the Joint Chiefs of Staff
Adblock: Savior of the Internet.
The internet had plenty of good content before it was ad supported, and it will have plenty of good content afterwards. Come to think of it, the content was actually better before it was add supported.
Give me Classic Slashdot or give me death!
Google's unobtrusive text ads are out. Solution: really big ads that get in your face before you can get to the content. These sorts of ads have become much more popular recently and I can only conclude it's because they work.
Also growing in popularity is "answer this marketing survey before you get more than one paragraph of the content". It's only one question now, but as it grows in popularity there will be more questions. Ultimately you'll have to fill out an entire multi-page survey before being allowed to access content. This will be linked to your real name and Facebook account, of course.
Shutting down free speech with violence isn't fighting fascism. It IS fascism!
...who clicks on ads? The only time I click them is by mistake and then in frustration I close the new window, usually before it loads. My value per click is $0.
Great warrior...hrmph! Wars not make one great.
You should be so lucky... If Facebook stops having luck with the ad sales, they can just set up a new HQ somewhere in Langley and provide bespoke social-mapping solutions to a shadowy array of government and corporate customers(assuming that they don't already).
The company that has been hemmoraging money since 2004 will save Google from declining ad revenues?
Well.. maybe. Or Maybe not. But Definitely not sort of.
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.
I work in Google ads and the cost-per-click fretting miss the mark for lots of reasons.
- First we are talking year-over-year drop so the numbers are nowhere close to what the summary implies. In fact, they went up last quarter if I recall correctly.
- Second we believe lowering cost-per-click is a *good* thing as long as other metrics (such as revenue and clickthrough rate) stay neutral. It means advertisers are getting their clicks for less cost, which makes them happier, and more likely to dump more money in. This is exactly what has happened recently. It is not because advertisers are lowering bids - it is because of (intentional) changes on our end mostly.
- There is only one legitimate actual concern here: advertisers pay less for mobile ads, and mobile is becoming more and more important. But that has nothing to do with less interest in ads in general.
I know someone who is heavily involved in business management (involved in management consultant at the Vice President and above level of companies like Nissan USA, IBM, GMAC, etc) who has repeatedly said that good advertising/marketing is providing information to your potential customers. He would argue that the only time a business really wants to advertise/market to someone is when they are looking for something that business sells.
Really the problem with advertising has become that businesses no longer see it as informing potential customers about the products they sell, but instead see it as some sort of magical incantation to get people to buy their product even when it isn't something those people actually want. The more often a businesses advertising causes a person to buy something they do not actually want, the less effective advertising becomes going forward. If businesses would focus on convincing the people who actually want their product that they want their product they would find advertising effectiveness to go up significantly.
The truth is that all men having power ought to be mistrusted. James Madison
And how is Google going to make money to pay for those next great innovations?
If something is so important that you feel the need to post it on the internet... It probably isn't that important.
"'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,' â" including its recent acquisition of Motorola,"
Because being a commodity Android phone manufacturer definitely protects you from a relentless, demoralizing no-exit operations to realign costs with falling per-user revenues.....
http://www.asymco.com/2011/05/16/iphone-share-of-phone-market-in-q1/
Time was, Internet ads were a novelty. I've since learned to "see past them," pretty much ignoring them.
It's to the point now that if your ad is so in your face that it gets my attention, I view it as intrusive and it has a NEGATIVE impact instead of the positive impact you wanted it to have.
I learned the same trick with newspaper, billboard, TV, and radio ads as a child. I expect most others did as well. This might explain why the effectiveness of those ads hasn't changed recently.
This comment sponsored by Commander Taco's Pink Ponies. Geeky Girls love Commander Taco's Pink Ponies.
I am having to learn this trick over again for electronic-billboard ads and product-placement ads, but once I do, things will be back to a "steady state" of non-changing (in-)effectiveness.
Knowledge is how to play a game, intelligence is how to win, wisdom is knowing what game to play.
The only successful targeted internet ad company that I know of is Amazon.
I've bought hundreds (thousands?) of dollars of stuff based on recommended items. I forget exactly how they phrase it but its something like "people who bought your Charlie Stross book "Rule 34" also bought the following books" and they list Accelerando and The Apocalypse Codex and so on. Ditto about a zillion other authors and non-book products.
I've never intentionally clicked on or purchased anything from any other targeted ad, and have been using ad blockers since weeks after that tech was invented.
The scary part is thinking about what really finely focused /. ads would push on us /.ers. Hmm. Instant Hot Grits, Debian install disks, buy this package at a discount: one cup now with pix of two girls, lots of rick astley / rickroll music...
"Science flies us to the moon. Religion flies us into buildings." - Victor Stenger
We could only be so lucky.
If it could take Twitter with it to the grave, so much the better!
There's a big difference between ads and Facebook/Twitter.
Ads are prevalent throughout the web. You are likely to come across them no matter what your browsing habits (unless you use AdBlock).
Facebook and Twitter require you to visit them and/or sign up. I see no impact to my life from Twitter because I don't use it. I do see an impact from Facebook because I choose to use it and it is a valuable tool for keeping in touch with friends and family all around the world.
I've never understood why so many people on Slashdot complain about Facebook. Nobody is forced to use it. Plenty of people choose to ignore it and their lives go on. Similarly, plenty of people choose to use it, aware of potential pitfalls, and their lives do not explode in flames.
If you dislike it for whatever reason, then don't use it. If you don't sign up for a Facebook account, Zuckerberg is not going to send proselytes to your door to pass on the good word. If you do sign up for a Facebook account, don't give them your cell phone number and address.
Google, on the other hand, collects all manner of data about you from the myriad of services you use, even if you don't sign up for an account.
I expect several replies about Facebook's abuse of privacy, poor security, etc. Don't sign up.
This article is pretty misleading. Overall spend on paid search is up, not down. Spend on online display is up, not down.
One of the liked articles says "To make up for the CPC loss, it managed to increase overall clicks by 42 percent". That's pretty speculative as to the direction of causation. It makes more sense that clicks are growing heavily in non-premium keywords, ones that command lower price points. I haven't seen any evidence that premium keyword ad pricing is falling dramatically.
One thing that does ring true is that overall online advertising spend growth is trailing inventory growth, and therefore per-unit pricing on inventory is probably decreasing. Spend growing, inventory volumes growing faster, per unit prices falling.
You're assuming they do not do this already? We already know that Facebook will pimp their customers to anyone. Since when does "anyone" not include intrusive governments?
Two of my imaginary friends reproduced once
"which means that employees would be willing to work for less"
That's a big, unjustified assumption. The historical record suggests that it's untrue. As things become cheaper we expect our standard of living to increase and, over the long term, it definitely has.
People that *used* to spend their time on various internet websites (and maybe used to click on ads), now spend *all* their time on facebook.
Facebook has supplanted the rest of the commercial internet. People that hung out on Reddit or 4Chan or Digg or iWon.com now just spend all their time playing FarmWars on facebook.
Online advertising *depended* upon "dummies". People that actually would try to punch the money. People that believed you could get a Laptop for one dollar. People that were interested in a local housewife's anti-aging/diet formula that WORKS!!! and the big companies don't want anyone to know about.
Yes. Dummies. And now those dummies are on Facebook, sharing George Takei's silly pictures, posting lolcats, and piss-poor photoshops as "real images". That's why internet revenues are down -- those dummies are too busy with their lolcats to punch the monkey.
If telephones are outlawed, then only outlaws will have telephones.
Are you referring to the decision to use AdBlock being one which is encouraged because of a Tragedy of the Commons situation in which the "players" are consumers of internet content, or are you referring to the production of ad blocking tools being a result of the escalation of intrusive advertising which results from a Tragedy of the Commons in which ad-supported internet sites are the players?
Because, you know, both are true.
A mistake from the beginning on the internet was to assume users had to click on ads for them to have value. Few other mediums place such a requirement on themselves, including print, billbaords, radio ads, etc. The whole point is to plant awareness of a brand in the mind of trhe consumer, so that they may decide to try the product. It is the same online, if we focus on the ads making a visual impression and creating a memory, they can be seen as effective in creating awareness, and in fact, millions can see an online ad, which makes it something that is as visible as a print ad. Many consumers will see an ad and make a note on it but as they are busy doing something else may not click on the link. its unreasonable to expect users to click on a link and also not necessary.
Online ads are just an online billboard, its stupid to try to obsess over link hits, something that isnt even a possibility anyway with other ad mediums .
It seems like the online ad business decided to count link hits, becuse "we could", but it was actually a bad idea, few other ads mediums measure their success on whether a user will make a split second decision but rather on whether they buy the product in coming weeks, even months.
Also this declining in advertising revenus has been going on for years.
http://stateofthemedia.org/2012/newspapers-building-digital-revenues-proves-painfully-slow/newspapers-by-the-numbers/
Rapidly declining advertising revenues continue to be the industry’s core problem. The losses in 2011 were slightly worse than those of 2010 – 7.3% compared to 6.3%. Ad revenues are now less than half what they were in 2006.
http://www.nytimes.com/2012/02/03/business/media/quarterly-profit-falls-12-2-at-times-co.html
The New York Times Company reported on Thursday that its fourth-quarter profit declined 12.2 percent as rising subscription and digital advertising revenue at its largest newspapers could not offset the continued drop-off in print advertising.
http://online.wsj.com/article/BT-CO-20120703-702076.html
Mediaset SpA (MS.MI), Italy's largest private broadcaster, expects advertising revenue in its home market to decline in the first half of 2012
http://www.guardian.co.uk/business/2011/may/08/itv-advertising-sales-drop
ITV expected to report first decline in ad revenues for 18 months
http://www.exa.com.au/articles/autumn_09/
Meanwhile, free to air broadcasters have experienced multi-million dollar dives in profits and are writing their assets down as worthless. Channel 7, 9 and 10 are crippled by debt and funding problems in the face of declining advertising revenues and changing trends. Likewise, print media is experiencing huge decreases in both readership and advertising revenue.
http://www.filmneweurope.com/news/romania/declining-ad-revenues-at-romanian-tv
The deficit of the Romanian's public TV, SRTV (www.tvr.ro), decreased by 0.71% in 2011, to €36.7 million Euro, while revenue from advertising was 7.4 million euro in 2011, down 24.06% from 2010.
http://www.abc.net.au/news/2012-02-15/sbs-admits-financial-trouble/3830502
SBS battling falling ad revenue
http://multimedia.journalism.berkeley.edu/tutorials/digital-transform/print-editions-decline/
A steady decline in print circulation and a precipitous drop in advertising revenue in 2008 and 2009, especially classified advertising, have taken their toll on newspapers and newspaper chains.
Visit CryptoGnome in his home.