Posted March 28, 2008 10:39 am by with 5 comments

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As we reported yesterday, Google’s paid click growth is down 3% in February compared to January, according to comScore. While a slow down in growth shouldn’t be a trigger for GOOG stockholders to sell the farm, it’s the dramatic decrease that’s causing investors to dump the stock.

After seeing months of 25% to 40% growth (comparing to the same month in the previous year), February’s click-through numbers were up only 3% compared to February 2007. It’s this apparent stalling (who knows if comScore is accurate or not) that has Wall Street doing its Chicken Little dance.

Of course, Google is being “Google” and isn’t saying anything about comScore’s numbers. (Sidenote: Which is probably a good thing for Google. The first time it makes a public statement to counter any third-party growth numbers, it will set a dangerous precedent. Wall Street would then expect Google to weigh in, and if it didn’t, would assume the numbers were accurate).

So, why are we seeing a reduction on click growth? Most observers are pointing to the recent changes to AdWords which changed the “clickable” area of the ads, and likely reduced “inadvertant” clicks–and Google’s growth along with it.

The move by Google is seen by most as a long term strategy. Sacrifice short-term growth numbers in favor of increasing confidence in the quality of AdWords click-throughs. Increase confidence and you’ll keep your advertisers pumping in more money and attract new ad partners in the process.

Is this what we’re seeing here? Is Google betting on its long-term growth rather than short-term gains? I guess only it really knows, but without any explanation from the Google mothership, comScore, Wall Street, and Marketing Pilgrim will earn its keep by filling in the blanks.

I’d love to hear your thoughts on the growth numbers. What do you you make of it?

  • Maybe people are learning that they’re ads? I’ve meet several people that think they’re organic search results and have no idea what they really are.

    It could have to do with the economy or it could be a result of them trying to make clicks more valuable?? It’s really hard to say without a lot of data; I’m sure Google’s figuring it out right now.

  • I agree Jayson. There are so many factors that come into play it’s hard to say with any certainty what the cause is.

    Sometimes we all want quick and easy answers when we need to let things play out.

  • I’ve heard quite a few people complaining of un-explainable increases (i.e. doubling and trippling, or more) in their Adwords keyword bid costs for Feb and March. Wonder if that has anything to do with the slowing in Adwords growth. People using Adwords aren’t doing it just for fun, and increases in Advertising costs are going to drive some people away.

  • Mark Szolosi

    In my opinion, Google is continuing to take steps to ensure that Google ads land on relevant sites and deliver a positive user experience. By doing so, Google is trading some short-term capital gain for potentially much longer term consumer confidence and better return on investment for the growing pool of legitimate advertisers. We all hate clicking on ads that deliver us to sites that are not relevant, slow, or are only designed to deliver us to additional paid advertisements. If Google continues to get rid of these types of sites (by not serving their ads) then I actually will be more inclined to click on ads in the future…. I think the current Google stock price reflects a combination of short-term investor reaction and those that don’t truly understand the future market that Google is working to protect….

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