And what inspired the writing of this article was actually the release of Google's Q2 report earlier today. After reading it I immediately had to contact Richard and let him know that the results confirmed some of the predictions noted in his work. He writes:
"... the auction-based bidding system makes this a double-edged sword. As the number of advertisers declines, so does the competitive pressure for higher bid prices. If advertisers don't step up to the plate and bid more aggressively for placement, then it's possible that search revenues could stagnate."
Google revenues were up only 3% over Q1 of this year and revenue from paid clicks was down by 1%. This is the first time in Google's history post-IPO that I can remember them showing reductions in revenue in one quarter over the previous. It appears that this new paid search model in not quite as effective at pulling in money as the old.
Now, to be fair, the new system of requiring higher quality scores and better ads and landing pages is new - only a few months old at this point and so there are likely still bugs to be worked out, but Wall Street did not react favorably to the announcements today and I suspect that the situation isn't going to look better for Google at the close of day tomorrow (though what do I know about stocks).
"... the auction-based bidding system makes this a double-edged sword. As the number of advertisers declines, so does the competitive pressure for higher bid prices. If advertisers don't step up to the plate and bid more aggressively for placement, then it's possible that search revenues could stagnate."
Google revenues were up only 3% over Q1 of this year and revenue from paid clicks was down by 1%. This is the first time in Google's history post-IPO that I can remember them showing reductions in revenue in one quarter over the previous. It appears that this new paid search model in not quite as effective at pulling in money as the old.
Now, to be fair, the new system of requiring higher quality scores and better ads and landing pages is new - only a few months old at this point and so there are likely still bugs to be worked out, but Wall Street did not react favorably to the announcements today and I suspect that the situation isn't going to look better for Google at the close of day tomorrow (though what do I know about stocks).
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