Richard Waters Unanswered questions from the Google click-rate conundrum

click.jpg So the fall-off in paid clicks on Google wasn’t a one-month phenomenon. The comScore report a month ago that the number of clicks on the search engine’s adverts had fallen slightly in January from a year before touched off fears that the Great Google Slowdown had set in. It didn’t matter that comScore itself later argued that quality improvements in Google’s ad system could account for the decline: the seeds of doubt had been sown.

The latest figures show that this was not an isolated phenomenon. The research firm now says that Google’s paid clicks in the US edged up by 3.1 per cent in February, which is at least better than the 0.3 per cent decline the month before. But this still represents a major deceleration from the 25 per cent increase in the fourth quarter of last year, and with search queries still growing strongly it points to a big change in the way searchers respond to adverts.

Only Google’s next quarterly earnings will reveal whether an advertising slowdown is setting in, but even the most rosy interpretation of events has to account for questions like these:

- Why is the click-through rate on adverts falling? It’s one thing for the number of adverts to decline – that shows that Google is pruning the least effective/ relevant. But shouldn’t that actually lead to an increase in the click-through rate? Intead, it fell 5 per cent in the latest month.

- How quickly does pricing in the Google ad market respond to quality  improvements? Higher quality ads should produce better leads, which should feed through into higher prices per click. But this won’t happen overnight. Effective as Google’s ad system is, this is not a perfect market. For now, the fall-off in clicks is the only verifiable fact (at least if two months of comScore numbers are to be believed.)