A post on ZD Net argues that Google's Adwords system over values the cost of clicks. You may have noticed the bad news from Yahoo regarding advertising revenue. Auto makers in particular have cut back on advertising budgets. In contrast, Google seem to think they are immune. Do you agree?
I think the auto industry is the business that's in trouble, not Google, or PPC in general. The beautiful part of PPC is you can easily measure your ROI (in most cases). I am willing to bet that the auto companies were overspending for exposure rather than paying for real results. And I bet they were spending on content advertising, which I think is overpriced. I doubt we'll see is anything like the recent levels of PPC growth unless local brick and mortar businesses start looking at the major PPC providers like they are the yellow pages. If and when that happens geo-targeted advertising will take off and growth will continue at a healthy pace. As for Yahoo, I think they have a habit, going back into the mid 90's, of assuming that phenomenal growth in any revenue stream is sustainable. Dot Com mania was never going to end, in their eyes, and now they were betting that PPC revenues would skyrocket for years and years at the same rate. The internet advertising market is ever changing and matures rapidly, yet Yahoo only reacts rather than foresees. Google sees the next big step (probably having to do with local, brick and mortar businesses), while Yahoo whines and then eventually reacts to what Google is doing.
Mike, good response. Sure auto makers - especially the traditional American manufacturers - are in more trouble than Google. But Auto is a mature 100 year old industry with low expectations. Google is 8 years old with a huge valuation relative to scale. The valuation is based on an expectation of continuous growth. The ZD Net post argues that the unique value of a click is currently over valued. My observations bear this out - particularly when you look at owner-managed campaigns. Whilst Google Adwords represents 5 to 10% of advertising budgets this wastage is largely ignored. But as Yahoo has found, online budgets are being scrutinised and its just a matter of time before that scrutiny starts to impact on Google.
Adwords and other ppc still gets far better measurable results than most other forms of advertising. Besides large corporations have been happy to blow money on wasteful advertising created by madison avenue agencies for years. Even if these businesses do end up having negative ROI it will be nothing new to them.
Just like in any industry price is determined by supply and demand. Personally, I don't think demand is going to stop soon since still more and more smaller and non-US companies are hopping on the PPC train. There might be slumps in industries that are not doing well, but I think this will be compensated by industries with a brighter outlook. I agree with Mike that the automobile manufacturers where probably overspending because they saw PPC as a way to gain exposure. I think it works far better if you use PPC with the goal of transaction in mind. That way you can measure what cost per click gives you an acceptable ROI. I think ad dollars spent for exposure will go elsewhere in the future, but that PPC will still get a lot of the ad dollars that target transaction/conversion. Since transaction is what drives a business, I don't see how Google and Yahoo could be in trouble anytime soon. The only thing that could crash the bid prices from my perspective is an increase in supply, i.e. Yahoo and MSN getting a bigger share of traffic. With more networks to choose from advertisers could play them against each other for lower prices.
I think the article is nothing but an attention garbbing headline with a bunch of crap after it. Makes me wonder if Donna Bogatin (the author) even has an AdWords account.
Its all about ROI. If we make money then we are happy. Once the clicks start losing money for advertisers then we stop advertising.
Are you arguing the click prices are overvalued, or Google stock is overvalued, or both? If you find Adwords to be overvalued with poor ROI, then it's only because you're mismanaging your campaigns. It's an auction system, it's up to you whether you buy and at what price. Hello? PPC is more ROI driven than any other medium. I have no idea where people come up with the idea that PPC is 'in trouble'. In terms of the stock, it's the other advertising mediums that are in trouble. Current penetration rates are miniscule compared to the overall market. Look at the decline of classified spend and print YP spend, along with the rise of PPC budgets, and tell me again how it's overvalued. Anyhow, keep perpetuating this myth, please. It keeps my click costs down and profits up. Thanks for your help.
The ROI doesn't have to be better than other forms of advertising, it just needs to be in line with the advertisers expecatations. In my world ROI includes the measurment of the lifetime value of a PPC customer, not just immediate return. IMO most of the people bitching about "overvalued" PPC prices are the rookies who think the only measurement of ppc success is an immediate return of $xx.xx when they spend $x.xx. The bottom line is as long as consumers spend time online advertisers will pay to put ads in front of them. The platform used to deliver those ads is almost irrelevent. All and all I think the article is fluffy hyped up crap written by someone who has little to no PPC experience.
I agree 100%. Also, don't make the mistake of lumping Google Adwords in with Yahoo's 'softness' in the market, or whatever that spin was they announced yesterday. Yahoo is seeing softness in the market because their platform hasn't been updated since 2000. IMO, the only danger google faces is if they don't improve search results. That's really all that matters. If they can't retain visitors, they lose inventory. When that happens, they're vulnerable.
Depending on the product or service being advertised there could well be a lengthy lag between between a potential customer clicking an ad to discover a product and then coming back later to buy. I've seen this happen when we stopped a PPC campaign, but enjoyed improved sales for a period after. If also took took a while to get results after we resumed too. Don't forget that Google has a CPA system waiting in the wings too.
Good point guy from chicago. Also ROI is less important than net profits. I'd rather have a million clicks with an ROI of 10% than a thousand clicks with an ROI of 160%.
when there a real competitive market in PPC advertising eg google vs microsoft vs yahoo vs others there will be lower cpc for advertisers and higher cpc for publishers That is because the profit margins of the provider will be squeezed. This is what we call the free market. Atm what you have it Google doing what the hell it wants, treating publishers like crap.
Not likely. Advertisers paying higher prices is what will keep publisher per click revenue higher on a long term basis. The market is already pretty competitive with a decent number of major players. Hardly. I know many people who have a great relationship, via Adsense, with Google years. Google may treat it's crappy publishers like crap, but hey, that's business. Anyway, what you posted really has nothing to do with this thread...so thanks