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. Podesta, Sweet!

    I’ll correct you only because I know if things against a person aren’t corrected, they get believed.

    I wish, I was a Microsoft employee, then I’d be able to fulfill my potential, as it is I’m a nobody in the middle of nowhere in little old england.

    I have no preference for any of these companies.
    Did you even read all I said?

    While my grammar and spellying/typing can be lazy/fast at times, I find it Highly offensive that your bigoted mind has made a range of assumptions about me based only on your disappointing prejudices and the spelling of my name.

    Kind regards,

    Shakir Razak

    Ps.
    sorry everyone else, robert, for that :(

  2. Podesta, Sweet!

    I’ll correct you only because I know if things against a person aren’t corrected, they get believed.

    I wish, I was a Microsoft employee, then I’d be able to fulfill my potential, as it is I’m a nobody in the middle of nowhere in little old england.

    I have no preference for any of these companies.
    Did you even read all I said?

    While my grammar and spellying/typing can be lazy/fast at times, I find it Highly offensive that your bigoted mind has made a range of assumptions about me based only on your disappointing prejudices and the spelling of my name.

    Kind regards,

    Shakir Razak

    Ps.
    sorry everyone else, robert, for that :(

  3. I find a theory of ‘ad fatigue’ believable. The existence of general warning fatigue has been thoroughly substantiated through research. That is: The more warnings people are exposed to the less likely they are to pay attention to them, and, as a result, avoid whatever is being warned against. I would think chronic exposure to ads has a similar effect.

    I find myself thinking that the sizeable group of programmers here on visas who read Scobleizer, Microsoft employees I gather, would profit by studying English instead of dissing their employers’ competitors on blogs like this one. Their grammar and spelling are painful to read. At first I thought Shakir Razak was someone playing a joke. But, apparently, his skills are really that awful.

  4. I find a theory of ‘ad fatigue’ believable. The existence of general warning fatigue has been thoroughly substantiated through research. That is: The more warnings people are exposed to the less likely they are to pay attention to them, and, as a result, avoid whatever is being warned against. I would think chronic exposure to ads has a similar effect.

    I find myself thinking that the sizeable group of programmers here on visas who read Scobleizer, Microsoft employees I gather, would profit by studying English instead of dissing their employers’ competitors on blogs like this one. Their grammar and spelling are painful to read. At first I thought Shakir Razak was someone playing a joke. But, apparently, his skills are really that awful.

  5. Pingback: Randomness
  6. Shakir: I was at VON. Was lots of fun. I only dropped in for a few hours, though. Everyone wants to have the next video portal. Not sure they’ll succeed. Other people are trying interesting advertising approaches. Others are doing interesting distribution systems (P2P, etc). More to come. I am swamped.

  7. Shakir: I was at VON. Was lots of fun. I only dropped in for a few hours, though. Everyone wants to have the next video portal. Not sure they’ll succeed. Other people are trying interesting advertising approaches. Others are doing interesting distribution systems (P2P, etc). More to come. I am swamped.

  8. Thanks Robert,

    (I normally email important blogggers directly 1st, rather than diagree, but too late)

    Different type of Theory.

    There’s been real hard research (can’t be bothered to google), and I expect you’ve seen the semi-sophisticated stuff using eye-trackers, beyond that there’s EEG-type stuff; WPP.com also provides a whole load of quality research for free.

    On the other hand, It might be saying something, That in the search industry, That thinks it’s at the cutting edge of our lives/future, (actually how backwards), Google is the only one that’s not only done/confirmed the research internally, but more importantly, actually implementing it.

    They are soo far ahead, the others can’t even match them, let alone get ahead.

    Love to know what you thought about the other stuff/concepts/predictions I posted.

    Thanks in advance.

    Yours kindly,

    Shakir Razak.

    P.s.
    Did you go to Von07, anything interesting?

  9. Thanks Robert,

    (I normally email important blogggers directly 1st, rather than diagree, but too late)

    Different type of Theory.

    There’s been real hard research (can’t be bothered to google), and I expect you’ve seen the semi-sophisticated stuff using eye-trackers, beyond that there’s EEG-type stuff; WPP.com also provides a whole load of quality research for free.

    On the other hand, It might be saying something, That in the search industry, That thinks it’s at the cutting edge of our lives/future, (actually how backwards), Google is the only one that’s not only done/confirmed the research internally, but more importantly, actually implementing it.

    They are soo far ahead, the others can’t even match them, let alone get ahead.

    Love to know what you thought about the other stuff/concepts/predictions I posted.

    Thanks in advance.

    Yours kindly,

    Shakir Razak.

    P.s.
    Did you go to Von07, anything interesting?

  10. >Shakir: a good scientist always tests his/her theories, no matter how obvious they might seem. Often times what’s obvious turns out to be not true.

    Heck, remember, the VC’s and execs at Alta Vista mostly thought that search was over before Google started up. That was the “obvious” belief on the street at the time.

  11. >Shakir: a good scientist always tests his/her theories, no matter how obvious they might seem. Often times what’s obvious turns out to be not true.

    Heck, remember, the VC’s and execs at Alta Vista mostly thought that search was over before Google started up. That was the “obvious” belief on the street at the time.

  12. “i would think Intercontinental hotel has more to do with Sushi than ‘www.sushigroovesouth.com’ (the 3rd link in google)”

    When you search for ‘phoenix Sushi’ there’s an ad on live.com for ‘Phoenix new Ringtones’. I wonder what that has to do with Sushi.

  13. “i would think Intercontinental hotel has more to do with Sushi than ‘www.sushigroovesouth.com’ (the 3rd link in google)”

    When you search for ‘phoenix Sushi’ there’s an ad on live.com for ‘Phoenix new Ringtones’. I wonder what that has to do with Sushi.

  14. Even though it is a very interesting post, I think everyone percieves Google as the “all-seeing eye” of what is best for the consumer. But with a Stock Price of $450+ per share, I highly doubt they are going to jeopardize their investor’s wallets.

    We were taught to believe and implement Quality score to lower costs and improve qualified traffic. But in actuality, they are only training us to play their game (a well designed game at that). There is no doubt they are testing all sorts of scenarios and labeling it better for the consumer. The question is how long will they be playing with our minds and wallets.

  15. Even though it is a very interesting post, I think everyone percieves Google as the “all-seeing eye” of what is best for the consumer. But with a Stock Price of $450+ per share, I highly doubt they are going to jeopardize their investor’s wallets.

    We were taught to believe and implement Quality score to lower costs and improve qualified traffic. But in actuality, they are only training us to play their game (a well designed game at that). There is no doubt they are testing all sorts of scenarios and labeling it better for the consumer. The question is how long will they be playing with our minds and wallets.

  16. Naive!

    Dear Mr. Scoble,

    Love your work, but, with respect, in a couple of days, you’ve been naive about mobile 2.0 and this/google.

    I’ll try and keep it short:

    How much did google actually waste on this “research”. Anyone who know anything who works in advertising knows that the more adverts you have, the less their [commercial] “impact” -hence why advertisers often pay less the more other adverts their are around their own.

    Also, google has had a quality algorithm for its Adword advertisers for a while, to ensure their own relevancy and not just for the pure search results.

    The spin about doing this for the quality good and better cpc-likelyhood, is also a lie. The less advertisers they have, the more demand their is for those spaces (ad-realestate).

    Combine the above 2 in an auction system, and Google is gaming the sytem, and raising the rate at which the minimum buy for a single adword-ad has to be.

    However, neither exclude your comments about the uselessness about live.com (-ms (and yahoo) just doesn’t seem to have realised that search isn’t just the search-result output, but a whole eco system, where google seem to have finetuned every component,) or their actions being in preperation for CPA (So, how many ideas are they going to completely steal of Bill Gross!).

    However, what’s missed is that they’ve been preparing for this for a verry long time -what has Merchant been about, Base, maybe even catalogue, Dmarc, Youtube.
    They want to be at the point of every transaction, the interface, the grease (-they ain’t on the consumers side). They know, as any supermarket, credit-card company, data-miner, marketeer knows that the more information you have based on previous transactions history, the easier it is to be in place to “help” the next transaction along.
    I’ve been waiting since before they floated, don’t be surprised if they eventually do, for them to launch a credit card and maybe even a bank (the infrastructure is in place).

    They’d probably split the balance between something so proprietory (single destination) and the current merchant affilate network and being freindly with all…
    But as they’ve shown with even search, there’s no contradiction between having a primary destination, and multiple competing “partners” as shown by search distribution, adwords and even own-domain Gmail, etc!

    “naive…..” anyone…

    Respect your thoughts.

    Yours kindly,

    Shakir Razak

  17. Naive!

    Dear Mr. Scoble,

    Love your work, but, with respect, in a couple of days, you’ve been naive about mobile 2.0 and this/google.

    I’ll try and keep it short:

    How much did google actually waste on this “research”. Anyone who know anything who works in advertising knows that the more adverts you have, the less their [commercial] “impact” -hence why advertisers often pay less the more other adverts their are around their own.

    Also, google has had a quality algorithm for its Adword advertisers for a while, to ensure their own relevancy and not just for the pure search results.

    The spin about doing this for the quality good and better cpc-likelyhood, is also a lie. The less advertisers they have, the more demand their is for those spaces (ad-realestate).

    Combine the above 2 in an auction system, and Google is gaming the sytem, and raising the rate at which the minimum buy for a single adword-ad has to be.

    However, neither exclude your comments about the uselessness about live.com (-ms (and yahoo) just doesn’t seem to have realised that search isn’t just the search-result output, but a whole eco system, where google seem to have finetuned every component,) or their actions being in preperation for CPA (So, how many ideas are they going to completely steal of Bill Gross!).

    However, what’s missed is that they’ve been preparing for this for a verry long time -what has Merchant been about, Base, maybe even catalogue, Dmarc, Youtube.
    They want to be at the point of every transaction, the interface, the grease (-they ain’t on the consumers side). They know, as any supermarket, credit-card company, data-miner, marketeer knows that the more information you have based on previous transactions history, the easier it is to be in place to “help” the next transaction along.
    I’ve been waiting since before they floated, don’t be surprised if they eventually do, for them to launch a credit card and maybe even a bank (the infrastructure is in place).

    They’d probably split the balance between something so proprietory (single destination) and the current merchant affilate network and being freindly with all…
    But as they’ve shown with even search, there’s no contradiction between having a primary destination, and multiple competing “partners” as shown by search distribution, adwords and even own-domain Gmail, etc!

    “naive…..” anyone…

    Respect your thoughts.

    Yours kindly,

    Shakir Razak

  18. “What, again, does that have to do with Sushi”

    i would think Intercontinental hotel has more to do with Sushi than ‘www.sushigroovesouth.com’ (the 3rd link in google)

  19. “What, again, does that have to do with Sushi”

    i would think Intercontinental hotel has more to do with Sushi than ‘www.sushigroovesouth.com’ (the 3rd link in google)

  20. >JoeDuck: yes. He told me that they did a lot of research that showed you’re wrong.

    Heavy surfers typically want fewer ads in their way. I certainly am noticing that Google’s ads are more relevant to the searches I’m doing than its competitors. That gets me to believe in Google’s ads more, and makes me more likely to click on one of them.

  21. >JoeDuck: yes. He told me that they did a lot of research that showed you’re wrong.

    Heavy surfers typically want fewer ads in their way. I certainly am noticing that Google’s ads are more relevant to the searches I’m doing than its competitors. That gets me to believe in Google’s ads more, and makes me more likely to click on one of them.

  22. 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.

    Are you sure he said this? Heavy users are generally going to want a bunch of ads to quickly scan because as you note in the examples the context matching and queries are usually not specific enough to come up with the “right” ads.

    Revenue per click goes down as you add more ads at lower per click rates so it complicates things as well, but I don’t get the ‘trust’ factor he cited – it just does not make sense to me that they are effectively training me to click on ads.

  23. 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.

    Are you sure he said this? Heavy users are generally going to want a bunch of ads to quickly scan because as you note in the examples the context matching and queries are usually not specific enough to come up with the “right” ads.

    Revenue per click goes down as you add more ads at lower per click rates so it complicates things as well, but I don’t get the ‘trust’ factor he cited – it just does not make sense to me that they are effectively training me to click on ads.

  24. Outside the US, type “Cyprus hotels” into Google and you still get a total of 11 sponsored links – but all for hotels in Cyprus. Same search on Live gives 8 sponsored links – only 1 seems to be remotely relevant.

  25. Outside the US, type “Cyprus hotels” into Google and you still get a total of 11 sponsored links – but all for hotels in Cyprus. Same search on Live gives 8 sponsored links – only 1 seems to be remotely relevant.

  26. Now if only they did something about the spam on blogspot. I wonder how much money Google gets from typosquatting and spam sites.

  27. Now if only they did something about the spam on blogspot. I wonder how much money Google gets from typosquatting and spam sites.

  28. so you mean to say that what google does is get the ads based on popularity index as Robert Scoble points out(relevance) .. and on top of that shows less ads ..

    but how is google sure that user will want to click only on those few ads shown to user .. may be there is a better deal for user in some add which they didn’t show …

    i agree that page look gets clumsy by showing lot of ads ..but then showing less ads in not the solution ..in the end i would say if ppl can find out a more elegant soln to this prob. then it would be nice ..

  29. so you mean to say that what google does is get the ads based on popularity index as Robert Scoble points out(relevance) .. and on top of that shows less ads ..

    but how is google sure that user will want to click only on those few ads shown to user .. may be there is a better deal for user in some add which they didn’t show …

    i agree that page look gets clumsy by showing lot of ads ..but then showing less ads in not the solution ..in the end i would say if ppl can find out a more elegant soln to this prob. then it would be nice ..

  30. now if we could just get websites to understand the “less is more” concept. Many sites in my industry are just packed with Google ads…

    Having more ads displayed does not improve my chances of clicking on any of them…especially if I came to the site looking for the content that requires scrolling to find..

  31. now if we could just get websites to understand the “less is more” concept. Many sites in my industry are just packed with Google ads…

    Having more ads displayed does not improve my chances of clicking on any of them…especially if I came to the site looking for the content that requires scrolling to find..

  32. I sometimes type an address in a search engine to go to a website. For e.g. “yahoomail”.
    The difference in layout and lesser ads distracting me makes me go back to google.
    (These are times when I don’t have access to firefox and sometimes IE pages are defaulted to the msn portal :))

  33. I sometimes type an address in a search engine to go to a website. For e.g. “yahoomail”.
    The difference in layout and lesser ads distracting me makes me go back to google.
    (These are times when I don’t have access to firefox and sometimes IE pages are defaulted to the msn portal :))

  34. Funny you post this, since I block all ads while surfing. I don’t even see the Google ads anymore thanks to good ad filtering software.

    Nothing like a clean webpage when surfing. Only the actual content please… thanks.

    Some people object to this saying it’s not right, but since I would never have clicked on an ad to begin with, I can justfy it. I don’t like being marketed to unless I choose to allow it. I don’t. I’m the same guy who mutes the TV during commercials. I’m just not interested in what people are selling.

  35. Funny you post this, since I block all ads while surfing. I don’t even see the Google ads anymore thanks to good ad filtering software.

    Nothing like a clean webpage when surfing. Only the actual content please… thanks.

    Some people object to this saying it’s not right, but since I would never have clicked on an ad to begin with, I can justfy it. I don’t like being marketed to unless I choose to allow it. I don’t. I’m the same guy who mutes the TV during commercials. I’m just not interested in what people are selling.

  36. i am also looking forward to how they will spin and ignore the fact that they are being audited for their bullshit Enron-esque tax filing practices.

  37. i am also looking forward to how they will spin and ignore the fact that they are being audited for their bullshit Enron-esque tax filing practices.

  38. Marcin: now try “Car Insurance” over on Live.com.

    I get three on top and five down the side.

    But, compare the quality of ads. Google has a lot better ads.

    Google’s top three ads? Progressive, Geico, Allstate.

    Live.com’s top three ads? Sky Blue Insurance, Mercury Insurance, eSurance.

    Not even close to the same relevancy. Funny, on Google those are flipped over on the right.

  39. Marcin: now try “Car Insurance” over on Live.com.

    I get three on top and five down the side.

    But, compare the quality of ads. Google has a lot better ads.

    Google’s top three ads? Progressive, Geico, Allstate.

    Live.com’s top three ads? Sky Blue Insurance, Mercury Insurance, eSurance.

    Not even close to the same relevancy. Funny, on Google those are flipped over on the right.

  40. That’s the first time I tried the Live.com search (by clicking on your link) and it looks horrible. Like I stopped loading the page before it finished…Nothing for me.

  41. That’s the first time I tried the Live.com search (by clicking on your link) and it looks horrible. Like I stopped loading the page before it finished…Nothing for me.

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