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 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.
No. According to the summary (and common sense), you'd see that their response is going to be more ads, to compensate for their less effective nature.
Quite the opposite.
If each ad display has less value, maintaining revenue means being more agressive with advertisments.
Rod Taylor
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!
...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).
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.
The problem is the quality of the adds.
Internet adds will be far more useful if we could somehow trust the content in them. If Companies like Google, did the extra work to verify the authenticity of the companies and was willing to put its own brand reputation behind the quality of the people placing the adds, I think the value of the adds will go right up. Because right now there isn't any good way to tell the difference from a stable start-up/small company with a snake oil sales man.
If something is so important that you feel the need to post it on the internet... It probably isn't that important.
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
The quality of the subtracts aren't all that great either.
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.
Only if you are a logical person. The teams of accountants running big Internet outfits that are dependent on advert revenue just see this as a que to "Hey! There's a spot we haven't put an ad on!".
Honestly though, from personal experience, redefining your ad strategy to something much more minimal, elegant and integrated seems to be working atm. The Plain advertisement times on the net are over. Now it seems to be all about social recommendation. (Which is nicer IMHO)
-- no sig today
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.
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.