Friday, March 28, 2008

More ComScore Data Supporing a Google Slowdown

ComScore's February 2008 data reports that Google had 515 milliion paid clicks during the month, a 3% year-to-year increase. When accounting for the additional day for leap year, click volume remained essentially flat. At InterneXperts, our conclusion is that it's impossible for Google's business to not be impacted by an overall economic slowdown. In a recession, consumers cut back their spending which directly translates into less interest in clicking on a search ad. In addition, search is a great advertising medium, but it is maturing, and Google has yet to successfully diversity its revenue stream. Yes, Google deserves credit for evolving their programs and policies to reward "relevant advertising" even at its own short-term expense. However, these policy changes can only dampen the economic effects of a recession and a maturing core business.

On the other hand, InterneXperts maintains that the overall short-term and longer-term prospects for the US Internet advertising market remain very strong, even in a recession. The continuing flow of ad spend from offline to online continues, and in a recession, priority is given to ad spend that is more tightly aligned with short-term sales opportunities. Both trends support a continued, healthy Internet advertising market. However, in spite of the increasing focus on performance, ROI-driven campaigns, fewer clicks translates into potentially fewer dollars spent on Google's sponsored search. It is true that fewer clicks creates upward price pressure on keywords, but performance-driven advertisers in a free market may increasingly seek out alternative advertising mediums that may offer lower customer acquisition costs.

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