As we suspected, people are clicking on fewer Google ads because there are fewer of them to click on.
ComScore statistics that clicks on paid-ads fell 0.3 per cent year-on-year in the US in January caused a run on Tuesday on the internet company’s shares, which are down by almost a third this year.
But in a blog note on Friday, ComScore said a careful analysis of its data did not directly support the two concerns driving down the shares, which were:
1) a potentially weak first quarter outlook for Google, and 2) an indication that a soft U.S. economy is beginning to drag down the online advertising market.
ComScore says the evidence suggests that softness in Google’s paid click metrics is “primarily a result of Google’s own quality initiatives that result in a reduction in the number of paid listings and, therefore, the opportunity for paid clicks to occur.”
The key paragraph:
“It is common knowledge in the industry that Google has been targeting what it deems to be low quality ads. It has introduced a ‘quality score’ that it uses to prioritize placement of ads or to decide to suppress an ad altogether. A suppressed, or ‘non active’ ad, can be reinstated by raising the bid above a quality-based minimum bid. In addition, the real estate available for ads is being reduced, squeezing the supply of available spots to bid on. The reduced supply, as well as the higher minimum bids, contributes to an increase in the price per paid click, which is what helps counteract the slowdown in the absolute number of paid clicks. Therefore, Google’s revenue will not necessarily suffer from this.”
So, panic over apparently. Even the former analyst Henry Blodget, who originally described the figures as a “disaster” and “shockingly bad”, says he’s come to agree that quality control was a factor in the fall-off in clicks.