1. How Google Still Makes Billions From Tiny Text Ads
Bryan Bartlett · November 5, 9:34pm, 2012
To the wizards of Wall Street, Q3 2012 was not a banner quarter for Google,
despite the search godzilla's $10.8 billion in revenues. So, how do you manage to disenchant "the street"
when you bring in almost $1,600 for every man, woman and child in America, and that's just in one quarter?
Here's how:
- Virtually all of Google's revenue came from online ads, and
- The average price paid per ad dropped just over 16%
- The percentage of users clicking through the ads was stagnant
To the average Wall Street numbers cruncher, these stats are tantamount to a sign from heaven that the
apocalypse is imminent. Price of ads dropping, click throughs not increasing? Truly, the sky is falling almost
as fast as Google's stock price (which tumbled from $750 per share to $680 in the wake of the earnings
announcement.)
Not so fast, says Larry Kim, founder and CEO of Wordstream, a firm that advises companies on how to
spend their advertising budgets. In a recent article in Wired magazine, Kim looks under the covers to find
quite a different story, a story that bodes well for both Google and its advertisers. Specifically, a couple of
additional statistics Wall Street seemed to disregard:
1. Adwords were up 21.6%
2. Display ads were up 29.1%
So, how does this counter the drop in average ad price and stagnant click throughs? First of all, with both
Adwords and Display ads showing impressive growth, it stands to reason that the lower cost of ads is
stimulating, not shrinking the business. As to the click through percentage, with higher numbers of ads, a
stable click through percentage still equates to more activity. ( Ex: If 50% of 100 ads are "clicked", you have
50 clicks, but if 50% of 120 ads are clicked, you have 60 clicks.) The bottom line: Google is being
democratized, used by more people for more things. As this trend continues, revenue will continue to grow.
And with the world just beginning to swing into total online saturation mode, rumors of the fading of the
Google Empire, to paraphrase Mark Twain, are highly exaggerated.
The top ten industries that spent money on Google ads in Q3 2013 range from number one Finance to
number ten Beauty and Fitness (with the usual suspects like travel, shopping, education and technology
wedged in between.)
At Chango we operate on a dCPM (Dynamic CPM) model but if you did the math to translate our dCPM into
CPC, you'd find that our CPC would be lower...much lower in fact. Here is a link to our calculations andWhy
Search Retargeting Can Save You 96% Per Click Over SEM.
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