Google Law

Google recently pulled down some ads of a Clickshift client. The reason: the client sells merchandise that Google doesn’t like. The merchandise is not illegal in any way, it’s not offensive to anyone, it’s not even low quality or overpriced, but Google pulled the ads. Apparently, the review inside Google is somewhat inconsistent because hundreds of other advertisers at Google offer identical products.

Unfortunately, there’s no appeals process for Google Law. Google is certainly free to turn down money – it feels a bit unfair since they leave identical ads up, but it’s probably well within their right. It sure is frustrating for our client, though.

I find it ironic that Google has a questionable read on copyright law, while making their own, more strict, law about what products should be allowed. They make antitrust noise at the DOJ about Microsoft, but then they use their dominance of search to get entrance into the payments market. (Sure does feel a lot like bundling the browser with the OS…) They support openness and APIs, but just not for AdWords. As DavidZHawk explains, Google is even having its cake and eating it too when it talks about click fraud and implements quality score.

Like the Motley Fool says, maybe being crazy is why they make so much money.

Related Tags: google, google law

Measuring Search Engine Marketing (II)

At Clickshift, we think a lot about the analytics behind web advertising.  I’ve written before about how some of the math impacts the measurement of search engine marketing.  Macro trends impact a lot of this measurement too, but I haven’t seen much of that show up with clients we meet.

For instance, the average price paid across a sample of 200,000 keywords for our clients was 85 cents in the first quarter of 2006.  In the second quarter, that price climbed to $1.10.  The quarter did see a slight rise in average position of the ads too, so we’d expect some rise in price (to do this analysis for real, we’d need to control for the average position).  All other things being equal, a client with an ROAS (return on ad spend) of 500% in Q1 would see that ROAS decline to 387% as keyword prices rose by 29%.  (As an example: $1 spent in Q1 would have made $5, but in Q2, it would take $1.29 to make $5 – for an ROAS of 387%.)  Most people, especially with help from companies like Clickshift, can keep the returns close to steady even with the volatility in keyword prices, but the problem gets much harder as the time horizon gets longer.  Plus, their management expects them to improve each year – and a 10% improvement in ROAS in the face of a 50% rise in keyword prices gets pretty tough.  

We’ve heard potential clients say “last year, I could get a user for $50, so I want to be able to get a user for $50 for the next year”.  Maybe they will, but if keyword prices in their category are up 100%, they’d have to do twice as well to hit their old target.  Of course, if keyword prices fall, they should be able to spend less to get a user, not more.  To really measure search engine marketing, then, we need to use a baseline, probably by category.  Sort of like measuring the performance of a mutual fund by comparing how much better or worse it has done than the index of its asset class.

Fathom has done some work on an index.  Unfortunately, that index has seen a bunch of criticism, and may not be a great baseline.  We need an industry index that is broad-based, category-specific, and built with appropriate sampling.  Only then can online advertisers really understand how much the macro environment impacts their individual efforts.  


Related Tags: Fathom, keyword price index, search engine marketing, online advertising

Network Television Is Dying

As reported by the The AP, Johnson & Johnson (and possibly Coca-Cola) did not participate in the annual "upfront" fall season network television buying binge which typically accounts for 75% of fall ad sales. Further, total network upfront ad sales are projected to be down at least 3.4% from last year…and the damage may actually be worse due to the exclusion of Monday night football last year and the inclusion of Sunday night football this year.

Why are numbers down and major brands opting out of television advertising? Because television ads are becoming massively diluted, increasingly bypassed, and it is nearly impossible to track their impact. The average American household now gets 97 television channels (a 57% increase from 2000) and 16% of all households will have a DVR/TiVo type device by year end. Yet, in light of this changing landscape, only NBC cut ad prices this year, and they only did so by 5%…but only because they have been lagging in the ratings! The networks are not responding to market forces and advertisers are getting smarter and smarter. They realize that the once coveted primetime eyeballs they paid millions for back when Friends ruled the earth are either watching HBO or skipping ads with their TiVos.

Mainstream advertisers are starting to realize what an increasing number of e-tailers (the Buy.com guy excluded) and others have been picking up on since the boom/bust: nontraditional outlets can give you better and more measurable returns on your advertising dollars. Smart advertisers are channeling their budgets into search and other digital media where they can focus their campaigns at consumers they know are already interested in their products. They can then generate short-term, tangible results, link them to a specific piece of advertising spend, and use the results to optimize their budget going forward. The Economist described this trend in last week's "The Ultimate Marketing Machine" piece.

What does this all mean? Network television could be dying a slow death in a downward spiral of decreasing ad revenues. The continued dilution and reduction of dollars going to networks and their production companies will begat more low-cost reality-show knock-offs, which may pull more viewers that season, but in the long run will drive more away from network television…which will reduce ad revenue…rinse and repeat. Five years from now the line between sitcoms and movies will have all but completely disintegrated. We may all be purchasing shows and movies like we buy music on iTunes today, the only difference between the new episode of Lost and Pirates of the Carribean XI will be the length of the feature.

And where will advertising be then? On the net and other measurable formats, with companies like ClickShift there to optimize the complexity.

Related Tags: network television, advertising, online marketing