Did Google turn down the revenue knob?

Tonight at Jeff Pulver’s awesome party I met a Google employee who I’ll keep nameless. He works closely with the advertising team and found it interesting that I noticed that Google is putting fewer advertisements on each page than its competitor.

For instance, do a Google search for:

San Francisco Sushi.

You’ll find two ads along the top, and three along the side. In a second search I did, the ads on top disappeared and there were only five ads along the side.

There used to be more, the Google employee told me. But, he said, Google has done a lot of research with users and found that fewer ads mean less revenue SHORT TERM. But long term the advertising revenue actually goes up. Why? They found their users started trusting the advertising more and were more likely to click on ads.

Let’s compare. Let’s do the same search on Live.com. There’s three ads on top, vs. Google’s two and five ads along the side vs. Google’s three.

That’s three fewer ads to click on. But look again at the ads. Which ones are more relevant to the search? One ad, on top, is for the InterContinental Hotel. What, again, does that have to do with Sushi? Another ad is for “free online coupons.” Sushi? I see noise, not good sushi results.

Let’s head over to Yahoo. For the same search on Yahoo I see two ads on top and a whopping eight ads along the side. That’s twice the number of ads that Google has on that page. Damn, Yahoo should be raking in the revenue!

Problem is, the more ads you put on a page, the less they’ll actually work according to Google’s internal research. There’s an ad there for “San Francisco Boutique Hotels.” What does THAT have to do with sushi?

Anyway, Google is doing that to make way for its new “pay per action” advertising type (announced yesterday). This is brilliant. Advertisers are going to LOVE this. Imagine I ran a print shop, like PrintingForLess. Now I could tie my advertising onto actually getting a sale, or getting a good lead. You see why Google needed more relevant advertising before turning this on. They want only potential buyers to see an ad. Anything else is noise. Noise reduces buying behavior.

The thing I’ll be looking for is the next quarter’s financial results. I wonder how big a short-term hit Google will take for displaying fewer ads. I doubt it’ll be big. But long-term you can see where this is going.

Google’s pages look cleaner, more relevant, advertisers are happier (fewer accidental clicks that they have to pay for), and it sets the stage for the new pay-per-action plan.

Brilliant!

Oh, and thanks to Jeff Pulver. I hung out with him most of the day and he puts on an amazing event.

79 thoughts on “Did Google turn down the revenue knob?

  1. Very interesting comments.

    Though all the messaging about consumer experience, quality score and CPA is relevant Google will not make changes hurting their finance in the short term. They always make sure that any modification improve their quaterly results.

    Having less ads per page for advertising and the same amount of advertisers competing for ads should lead to higher price per click.

  2. Very interesting comments.

    Though all the messaging about consumer experience, quality score and CPA is relevant Google will not make changes hurting their finance in the short term. They always make sure that any modification improve their quaterly results.

    Having less ads per page for advertising and the same amount of advertisers competing for ads should lead to higher price per click.

  3. Hello Robert,

    Google is always looking for ways to increase their revenues and profits. Their smart enough not to get complacent and to always be considering changes to grow their business.

    If this move get their advertisers more traffic and at least comparable conversion rates then its a win for all.

    If it doesn’t, it could turn into the “haves” and “have nots” with the largest (most well capitalized) advertisers controlling the most valuable key words and the rest of the advertisers moving some of their dollars to other venues.

  4. Hello Robert,

    Google is always looking for ways to increase their revenues and profits. Their smart enough not to get complacent and to always be considering changes to grow their business.

    If this move get their advertisers more traffic and at least comparable conversion rates then its a win for all.

    If it doesn’t, it could turn into the “haves” and “have nots” with the largest (most well capitalized) advertisers controlling the most valuable key words and the rest of the advertisers moving some of their dollars to other venues.

  5. The skeptics don’t understand that Google really does put searchers’ interests first and advertisers second. It’s natural today to suspect the motives of every corporation. That’s sad. It’s a horrible indictment of business today to know that we assume every company is sleazy and just out to cheat us out of our money. Too many companies are. That’s what Google means by ‘Don’t be evil.’

    Google is fussy about ads so as to improve, not detract from, the searchers’ online experience–and it used to catch hell from its board for “giving away revenues” by not posting more ads, including flashing multimedia ads.

    But Google discovered that it works. On the internet, where it’s easy to switch services, the honest company stands out — to most of us, anyway. The only ads I’ve ever clickd on are Google ads. A clean page makes Google more appealing. And look at the results: Google keeps killing the advertising competition.

    Google has always said relevant ads are important, and has long moved ads that nobody clicks on to the bottom of the queue. Why post ads that nobody ever clicks on? The inability of other sites to understand this amazes me.

  6. The skeptics don’t understand that Google really does put searchers’ interests first and advertisers second. It’s natural today to suspect the motives of every corporation. That’s sad. It’s a horrible indictment of business today to know that we assume every company is sleazy and just out to cheat us out of our money. Too many companies are. That’s what Google means by ‘Don’t be evil.’

    Google is fussy about ads so as to improve, not detract from, the searchers’ online experience–and it used to catch hell from its board for “giving away revenues” by not posting more ads, including flashing multimedia ads.

    But Google discovered that it works. On the internet, where it’s easy to switch services, the honest company stands out — to most of us, anyway. The only ads I’ve ever clickd on are Google ads. A clean page makes Google more appealing. And look at the results: Google keeps killing the advertising competition.

    Google has always said relevant ads are important, and has long moved ads that nobody clicks on to the bottom of the queue. Why post ads that nobody ever clicks on? The inability of other sites to understand this amazes me.

  7. Don’t forget either that Google tends to raise the price for an ad,which I became aware off since I have +55 websites in Europe.
    For some of them,there’s no(!) competitor.
    Ad costs quadupled in a few weeks.
    Result: I simply lowered a lot of my max CPC.
    If there would have been a competitor around bidding more( like adwords states is the case),then I would understand.
    But no,no no.They prefer to not earn money.
    And finally,it’s the customer-business that pays for it.
    Do the bosses in Google know what their own software is doing.

    It’s like telling a guy at a petrol pump: well today we’ll double your price.
    Honestly…

  8. Don’t forget either that Google tends to raise the price for an ad,which I became aware off since I have +55 websites in Europe.
    For some of them,there’s no(!) competitor.
    Ad costs quadupled in a few weeks.
    Result: I simply lowered a lot of my max CPC.
    If there would have been a competitor around bidding more( like adwords states is the case),then I would understand.
    But no,no no.They prefer to not earn money.
    And finally,it’s the customer-business that pays for it.
    Do the bosses in Google know what their own software is doing.

    It’s like telling a guy at a petrol pump: well today we’ll double your price.
    Honestly…

  9. Pay Per Action is a lot of hype and time will really tell if it helps small business. I’m sure the same greedy people that benefit from optimized landing pages will also work that system to their own benefit. Similar to what Pay Per Click has become.

  10. Pay Per Action is a lot of hype and time will really tell if it helps small business. I’m sure the same greedy people that benefit from optimized landing pages will also work that system to their own benefit. Similar to what Pay Per Click has become.

  11. Not so sure……

    3 adds on the top means actually that only the first 3 search results are presented. To view the rest of the search results you have to scroll down. And THATS a big difference. The adds on the top are killing Google. Period. If you are not in first 3 places you DO NOT EXIST at all. Placing adda on top of the page is KILLING THE SEARCH ENGINE, especially Google (the rest I have ignored already since 2 years..).

  12. Not so sure……

    3 adds on the top means actually that only the first 3 search results are presented. To view the rest of the search results you have to scroll down. And THATS a big difference. The adds on the top are killing Google. Period. If you are not in first 3 places you DO NOT EXIST at all. Placing adda on top of the page is KILLING THE SEARCH ENGINE, especially Google (the rest I have ignored already since 2 years..).

  13. Robert,

    The Google employee is either wrong or meant something other than the standard definition of ‘short-term’.

    We manage 3-4% of Google’s total revenues on behalf of our clients, and their reducing ads had an immediate positive effect. Other changes to minimum bids also have improved revs, but from our data-driven POV, less ads = more $$ immediately as well as longer-term.

  14. Robert,

    The Google employee is either wrong or meant something other than the standard definition of ‘short-term’.

    We manage 3-4% of Google’s total revenues on behalf of our clients, and their reducing ads had an immediate positive effect. Other changes to minimum bids also have improved revs, but from our data-driven POV, less ads = more $$ immediately as well as longer-term.

  15. I am suprised fewer people picked up on this — its the Google quality score in action.

    Google doesn’t need to display more ads because they are forcing the remaining guys to pay more!

  16. I am suprised fewer people picked up on this — its the Google quality score in action.

    Google doesn’t need to display more ads because they are forcing the remaining guys to pay more!

  17. Live.com who? What site is it? Never heard of it! Crap, I dont remember when I opened it last. While Google’s research may make sense in providing better user experience however advertising hotels reflects hotel’s selling sushi, isnt it?

  18. Live.com who? What site is it? Never heard of it! Crap, I dont remember when I opened it last. While Google’s research may make sense in providing better user experience however advertising hotels reflects hotel’s selling sushi, isnt it?

Comments are closed.