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Google Down But Not Out Due To Poor Ad Click Growth

Advertisers have gotten more sophisticated in the past year or two and are looking beyond click-based ads for other options, industry insiders remark.

Google's stock took a beating on Monday and Tuesday due to fears about the company's future search advertising revenue.

Research from ComScore, not publicly released but cited by several financial analysts, found that Google's U.S. paid Web search clicks in January amounted to 532 million, a 0.3% decline from January 2007. The Internet metrics firm also reported that Google's paid clicks showed 13% growth in December 2007 from December 2006, and 25% growth in the fourth quarter of 2007 compared to Q4 2006.

Based on these findings, a Citigroup Global Markets research note attributed the decline in Google's stock to lack of click advertising growth.

Google declined to comment on ComScore's figures or its interest in online advertising techniques like pay-per-action advertising that offer an alternative to pay-per-click ads.

While Google's stock has recovered somewhat, doubts remain about the future of the click, at least among Google's competitors.

Microsoft on Monday introduced a new Engagement Mapping technique as a way to more accurately measure the factors that lead to successful ads online. Brian McAndrews, senior VP of the advertiser and publisher solutions division at Microsoft, dismissed click-based metrics as flawed.

In an e-mail, Mike Leo, president and CEO of online marketing firm Operative and founder of Avenue A/Razorfish, which was acquired by Microsoft, said, "Click rates won't cut it... Measuring response by 'clicks' doesn't truly reflect visitors' engagement with a brand."

Jay Hallberg, co-founder and VP of marketing of Spiceworks, an ad supported network management service, said that advertisers have gotten more sophisticated in the past year or two and are looking beyond click-based ads for other options. "We're seeing the resurgence of CPM and display-based advertising," he said. "In all of the deals we're doing, we actually aren't pricing any of them on cost-per-click."

Google's acquisition of DoubleClick, a player in online display advertising, shows that Google is looking beyond the click for growth. The same can be said for Microsoft and its bid for Yahoo, which is also strong in display advertising.

But the decline in paid clicks can also be seen in a positive light: As Citibank's research points out, the decline may be attributable in part to "Google's ongoing efforts to improve both lead quality for advertisers and the user experience for searches." Google, in other words, may be getting more aggressive in rooting out invalid and fraudulent clicks.

Ultimately, worries about the death of the click are overstated. And a down day or two for Google isn't necessarily a sign of impending collapse. But count on clicks counting less in the overall scheme of online marketing metrics in years to come.

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