In its second-largest acquisition, Amazon buys the company for $970 million.
A comScore report that clicks from Google ads flattened out in January set off speculation that the weak economy was cutting into consumer spending online. But a closer analysis suggests it’s a product of Google taking steps to improve lead quality.
Web measurement firm comScore Inc. reported to clients this week that the number of clicks on Google paid ads dropped slightly in January compared to a year earlier, after growing by 25% in the fourth quarter. That set off speculation consumers might be shopping less online because of the weakening economy. But a closer analysis suggests it’s a product of Google taking steps to improve lead quality.
The decline comScore reported likely stems from changes Google has made recently to improve the quality of clicks from ads on Google search results pages and on web pages that display ads served up by Google, according to David Szetela, CEO of search marketing firm Clix Marketing, who discussed the results with the comScore analyst who wrote the report, James Lamberti. Lamberti was not available for comment.
Among the changes Google has made is reducing the area around an ad that will result in a click in order to minimize accidental click-throughs. Szetela notes that Google informed advertisers of that change in the past few weeks, and told them to expect fewer clicks as a result. Google also reportedly has taken steps to reduce the exposure of sites that exist solely to host ads and acquire pay-per-click revenue, since those sites typically offer little content of value to the consumer.
The changes Google has made will benefit advertisers, including online retailers, because there will be fewer accidental clicks on their ads and because legitimate advertisers’ ads are likely to be positioned higher than those from sites that are trying to earn money by funneling consumers to retail sites, Szetela says.
Lamberti’s original report said that there were 532 million clicks on Google ads by U.S. Internet users in January, down 0.3% from January 2007 and 12% fewer than in October 2007. That represented a big turnaround as clicks on these ads, Google’s main source of revenue, had been steadily increasing, rising by 25% in the fourth quarter, according to comScore. The comScore data was released only to paying clients. But it was reported publicly by some investment firms, including Citigroup and Bear Stearns, and comScore confirmed the accuracy of the data they cited.
That led to speculation that the weakening economy was cutting into consumers spending online, a theory that some believe led to a 4% decline in Google’s stock price the day after the comScore data was reported.
But that theory met with a skeptical response from firms that closely monitor Internet traffic and search advertising. Hitwise, a web measurement firm that competes with comScore, noted it had not seen any decline in traffic to retail sites from Google. In fact, Hitwise says, 13.03% of traffic to its Shopping & Classified category of web sites came from Google in January 2008, versus 11.97% a year earlier. However, that includes clicks from both natural search as well as ads, and so was not directly comparable to comScore’s results.
Search marketing firm Apogee says its analysis of data from 27 online retailer clients indicates that traffic from Google was up 17% year over year, even after stripping out the lift that Apogee typically provides its clients, says Bill Leake, CEO. Most of those online retailers sell moderately priced goods, with average order values in the range of $50 to $250. “People haven’t stopped buying golf supplies, cowboy boots, diapers, clothes and consumer electronics,” Leake says. “We haven’t seen anything hit those sectors from a click perspective.”