Google on a Slippery Slope

I’ve always loved the purity of the Google vision to provide fast access to all the world’s information. The Google team has always seemed to care more about the user experience than about making money.

But today I glimpsed something that scares me and makes me wonder who is in charge at Google anymore. The pioneers who built the search engine were purists. But the settlers who are being hired at Google by the hundreds are probably more driven by making money than anything else.

For years I’ve watched Google provide a better user experience than Yahoo and MSN who have been far more willing to compromise the user experience with between 3 and 5 sponsored links before you get to see any natural search results. Plus, they sometimes don’t make it as clear as they should where the links are coming from–so users can distinguish ads from normal search results.

Today I saw for the first time that Google has caved into to whatever internal pressure this is for driving revenue growth, and they have really compromised the user experience.

I saw a Google search results page that showed 3 sponsored links above the natural search results. Here’s the screen shot.

I generally think that Sponsored Links above the natural results get a 2-4% click rate, while Sponsored Links on the right side of Google, the column that doesn’t both me as a user, get 1-2%.

So let’s do some math to see the revenue impact of this poor decision. (It could be huge.)

Google made about $6.1 billion last year, approximately half from their own site and half from their AdSense network. So let’s say that of the $3 billion in ad revenue from their own site, maybe 30% (a total guess) came from the top two sponsored links above the search results (the “obtrusive ads”) and 70% came from the right side links (the “unobtrusive ads.”)

So now, the top unobtrusive ad will become an obtrusive ad, and will probably get 1% more clicks than last year (when it was unobtrusive).

I once read a study that estimated the percentage of total searches that result in any paid click was something like 13%. (That may be off, I’m trying to grab that stat from memory.)

So if one ad moving from the right side to the top increases it from 13% to 14%, it will actually increase Google’s overall site revenue by about 7%-8%.

So $3 billion would become $3.21 billion.

Or this year’s site revenue which might be $5 billion (again a total guess) would become $5.35 billion.

In the short term, this is a huge win for shareholders who are going to see more aggressive revenue growth.

But in the long term, this makes them more vulnerable to startup search engines who are more concerned than Google is now with the user experience.

I hope this is a test, an experiment, and that Google will get enough negative feedback (from people like us) that they will abandon it.

This is a slippery slope. If this drives revenue and all the Google insiders cheer, what is to stop them from adding a 4th sponsored link above the natural search, or a 5th?

And if they really want to make a lot of money, how about displaying an interstitial ad every time any Google user clicks on a natural search result, before they get to the destination site?

Google could make trillions with that strategy!

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7 Comments

  1. David

    3 is pretty common. Try typing in airplane tickets, basketball tickets, or football tickets. I did some quick checking and found that all of these have 3 sponsored links. Looks like it might be even bigger then you think. Add this small complaint to their China compliant to how poorly Google Video works and it might be that Google is giving into the same pressures that all the other companies do–making a profit.

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  3. Michael Hood

    Paul, those ads on top actually get a CTR (click-through-rate) around 2-3x the ads on the right side. I’m using a multiplier instead of a hard number, because the average CTR for ads on any given result page depend on the quality (or lack thereof) of the organic results.

    A quick review of some of our campaigns reveals that while the 1st position on the right side earns a 6% CTR, the time they spent in the 1st “premium” (the ads on top) spot fetched an 11% CTR.

  4. Michael Hood

    Also, the thing to look for next won’t be interstitials. Those are far too obtrusive. People will simply flock to A9 to get Google results without the junk.

    The next thing will be more premium links at the *bottom* of the results. They may be a repeat of the ads that were shown at the top.

    Following this, I predict you’ll begin to see sponsored links interwoven into organic results. Color-coded in the blue background as they are now, but in the middle of organic SERPs. Used sparingly and heavily based on relevance, this will increase revenues significantly.

  5. wilson ng

    Hi Paul,

    I hope you don’t mind this, but I guess while I have been impressed by Google, I generally believe that yes, as they grew, they will have to become more and more conventional.

    Also, i think Mike has a point — if the top ads get 2 to 4% clicks and the right gets 1-2% lclick, then it is not only 1% more, but double the clickthrough rate.

    If the right gets 70% of the clicks, and the top gets 30% of the click, then we have to assume that the top gets 1/3 of all the clicks, which in effect without it, your ad revenue would be off by almost that much assuming that who clicks on the top will less likely to click on the right.

    Best regards,

    Wilson

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