tchannon

PPC Advertising Takes Its Toll on Google

Your thoughts are well received and thank you. I do not think Google is in trouble, but their growth will slow and those are some factors contributing to the arena.

For instance, one company I reviewed used to pay $0.50 CPC for the trademarked term; others got in the game, drove the price to $2.50 CPC over a course of a couple of years. That is 5x for the same real estate. The cap has been now been put on at $2, reducing any more exponential income growth from that piece of real estate. At 300 clicks per day for 1 ad (and we know that customers click on multiple ads), Google will be losing at least $50k over the course of the year for that term (assuming 1 person bid $2.50 and nobody bid between $2-$2.49) - and there will be no more upside. It used to be at $0.50, $55k was generated a year; at $2.50, it became $274k/yr. So, $50k/yr. lost on 1 term. If there are 1,000 terms (and a trademark term could be dozens of terms), that is $50M lost (which is a tiny piece of Google revenue). It's a simplistic assumption, but it is lost revenue and there will be no more growth along the lines they have seen it grow.

Google does not impose the PPC limits, but if you are an affiliate marketer, and the advertiser/merchant says 'no affiliate can bid over $2 CPC' then the affiliate has to oblige or be terminated from the program. This practice, too, is becoming increasingly common. Again, there will be ceilings to PPC revenue growth in thousands of the little crevices where Google succeeds.

SEM, as you are likely familiar, takes a lot of work. Companies that outsource will do so for expertise. If they bring in house and have an extra 20% to spend on Google, people are hired and it costs the company money to do so.

Yes, there are many advertisers that want CPM or eyeballs, but if you are paying CPC, you likely need sales, inquiries. Even if only 20% of CPC want CPA, it is still 20% and significant.

More and more companies are enforcing trademark bidding restrictions -yes, some have had them forever; some are just getting into the game. Granted, it's not the majority of search volume, but take thousands and thousands of trademarks, it has an incremental effect. Google has always claimed success because it could efficiently take $1 from 10,000,000 people a day - tiny transactions adding up to a big pie. If you start to limit the growth on a segment of these tiny transactions, even 10%-20%, it will have an impact on Google's growth.

Again, thank you for your comments and they are well received. In the end, nobody really knows what is going on or what is going to happen and I always appreciate lively discussion.