The Decline of Google's (and Everybody's) Ad Business 313
Hugh Pickens writes "Rebecca Greenfield writes that during their recent earnings call, Google reported a 16 percent decline in Cost-per-Click (CPC), meaning the value of each advertisement clicked has gone down. This follows a 12 percent drop last quarter and 8 percent the quarter before that showing an unfortunate reality of online advertising — unlike the print world, internet ads lose value over time. The daily and stubborn reality for everybody building businesses on the strength of Web advertising is that the value of digital ads decreases every quarter, a consequence of their simultaneous ineffectiveness and efficiency, writes Michael Wolff. 'The nature of people's behavior on the Web and of how they interact with advertising, as well as the character of those ads themselves and their inability to command attention, has meant a marked decline in advertising's impact.' This isn't just Google's problem. Overall, Internet advertising has decreased in value over the years as online advertising continues its race to the bottom. 'I don't know anyone in the ad-supported Web business who isn't engaged in a relentless, demoralizing, no-exit operation to realign costs with falling per-user revenues,' adds Wolff, 'or who isn't manically inflating traffic to compensate for ever-lower per-user value.' For Google's overall business, this loss doesn't mean as much, since it has since expanded its business beyond AdWords — including its recent acquisition of Motorola. For companies that didn't just buy big hardware companies however, it's a scarier proposition. Like Facebook, for example."
Re:Good (Score:2, Informative)
http://en.wikipedia.org/wiki/Web_banner [wikipedia.org]
The pioneer of online advertising was Prodigy, a company owned by IBM and Sears at the time. Prodigy used online advertising first to promote Sears products in the 1980s, and then other advertisers, including AOL, one of Prodigy's direct competitors.
So when you say "the content was actually better before it was add [sic] supported," you're talking about the 1970's?
Yes.. lots of very interesting content on the internet in the 70's. Much better than today [/sarcasm]
No (Score:5, Informative)
I work in Google ads and the cost-per-click fretting miss the mark for lots of reasons.
- First we are talking year-over-year drop so the numbers are nowhere close to what the summary implies. In fact, they went up last quarter if I recall correctly.
- Second we believe lowering cost-per-click is a *good* thing as long as other metrics (such as revenue and clickthrough rate) stay neutral. It means advertisers are getting their clicks for less cost, which makes them happier, and more likely to dump more money in. This is exactly what has happened recently. It is not because advertisers are lowering bids - it is because of (intentional) changes on our end mostly.
- There is only one legitimate actual concern here: advertisers pay less for mobile ads, and mobile is becoming more and more important. But that has nothing to do with less interest in ads in general.
Re:nobody ain't got no money anymore (Score:5, Informative)
Re:nobody ain't got no money anymore (Score:4, Informative)
I've often thought that advertising, all advertising is hugely overvalued, even more so with the Internet bringing us quick and easy information about competing products.
SOME advertising is certainly valuable, but the returns must diminish quite quickly after you've reached a threshold where people know you exist.
FEER TEH INNERTUUBES (Score:5, Informative)
Also this declining in advertising revenus has been going on for years.
http://stateofthemedia.org/2012/newspapers-building-digital-revenues-proves-painfully-slow/newspapers-by-the-numbers/ [stateofthemedia.org]
Rapidly declining advertising revenues continue to be the industry’s core problem. The losses in 2011 were slightly worse than those of 2010 – 7.3% compared to 6.3%. Ad revenues are now less than half what they were in 2006.
http://www.nytimes.com/2012/02/03/business/media/quarterly-profit-falls-12-2-at-times-co.html [nytimes.com]
The New York Times Company reported on Thursday that its fourth-quarter profit declined 12.2 percent as rising subscription and digital advertising revenue at its largest newspapers could not offset the continued drop-off in print advertising.
http://online.wsj.com/article/BT-CO-20120703-702076.html [wsj.com]
Mediaset SpA (MS.MI), Italy's largest private broadcaster, expects advertising revenue in its home market to decline in the first half of 2012
http://www.guardian.co.uk/business/2011/may/08/itv-advertising-sales-drop [guardian.co.uk]
ITV expected to report first decline in ad revenues for 18 months
http://www.exa.com.au/articles/autumn_09/ [exa.com.au]
Meanwhile, free to air broadcasters have experienced multi-million dollar dives in profits and are writing their assets down as worthless. Channel 7, 9 and 10 are crippled by debt and funding problems in the face of declining advertising revenues and changing trends. Likewise, print media is experiencing huge decreases in both readership and advertising revenue.
http://www.filmneweurope.com/news/romania/declining-ad-revenues-at-romanian-tv [filmneweurope.com]
The deficit of the Romanian's public TV, SRTV (www.tvr.ro), decreased by 0.71% in 2011, to €36.7 million Euro, while revenue from advertising was 7.4 million euro in 2011, down 24.06% from 2010.
http://www.abc.net.au/news/2012-02-15/sbs-admits-financial-trouble/3830502 [abc.net.au]
SBS battling falling ad revenue
http://multimedia.journalism.berkeley.edu/tutorials/digital-transform/print-editions-decline/ [berkeley.edu]
A steady decline in print circulation and a precipitous drop in advertising revenue in 2008 and 2009, especially classified advertising, have taken their toll on newspapers and newspaper chains.