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January 21, 2009
As Goes Google So Goes The Economy?
Forbes just published a piece about "Google as Economic Barometer". It has some merit and a lot of details. Basically stating "Investors searching Google's fourth-quarter earnings may see clues about the state of the Internet ad business, the economy and the future of the company itself."
Dropping various products like Print Ads, its Twitter-like application Jaiku, and Lively a Second Life clone, reflects a tightening of its bottom line. Firing 100 recruiters (and the implied drop in future hires) and the closing of its offices in Sweden and Norway, as well as a newly opened one in Austin, Texas are also the actions of a company trying to improve its numbers. The cutting of 20 engineers cuts a little to the heart of the company's operation.
In a recent discussion with a Google Adwords employee I found out it is going even deeper. Apparently budgets for entertaining top level advertisers have also been cut back. Guess now that they have them spending money there is no need to spend as much in appreciation.
To me this reflects a lack of foresight. Google has hit a wall. Those year over year double digit growth days are gone. They have become the major resource and there are not that many new clients to acquire.
Increasing what is paid for the clicks has been a careful balancing act that may not bring in as much revenue as it will lose them clients. That ban on gambling ads to stand as a "No Evil" stalwart lasted just as long as it took Yahoo to start taking money in countries that allow gambling.
Google does reflect our economy. And if they want to strengthen their position they have to do what will help the economy recover. Start helping the little guys. They are the ones that will stimulate the economy and can also stimulate Google's income.
If there was more transparency in AdWord's Quality Score, less expansion in broad match and an understanding of how to better serve the little guys - those 10s of thousands of minor advertisers - maybe the revenue numbers will increase.
I remember sitting in a search conference session and hearing many people say minimum bids have pushed them out of using PPC. They were not arbitragers, they were not agencies, they were small business owners who could no longer find a profitable CPA.
At one time all PPC companies had faith the market would work itself out. There was a little traffic left over for them to make some money. They worked the long tail and specific keywords many big comapnies did not. Now with expanded match the big advertisers are getting those and more for keywords that are now in some cases not converting.
If Google took a few steps back maybe everyone would be happier and the financial situation would work itself out. Whether our economy can do the same has yet to be seen.
Posted by Frank Watson on January 21, 2009 6:35 AM
Comments
Andy Atkins-Krueger January 22, 2009 3:08 AM
Google for too long has been allowed to create a true search monopoly. Their burn rate on advancing projects has to be in the billions over the last couple years. Most of which have been shut down after failed attempts at creating a lasting product. This is the same money that they have replaced by small percentage increases on the base ad rate. Increases so small that the average large advertiser doesn't even realize. However the small guy, he feels every dollars as his house is taken and his car is reposed.
Of course on the other side, research and development is an absolute necessity. The problem is, the fine line that needs to be walked to protect the small business while they attempt to fleece the internet whales has been erased.
Google's customer care is well below adequate, most times small advertisers wait days for responses to their requests for help. Then the replies given from Google are so difficult to understand, if they actually answer your question that you are left more confused and hopeless than when you first contacted them.
Don't get me wrong, we have long enjoyed the benefits of Google. Even while they fleece my clients with increased costs almost monthly. We would be happy if they decided to help the small business like Andy mentions above.
They need to clean up their house and decide to be for for small business before their greed eliminates these companies from the economic landscape.
Head Alienst February 25, 2009 7:48 PM
Frank - couldn't agree with you more and posted similarly on my own blog.