pocketrockets

SOME GOOGLE ADVERTISERS CUTTING SPENDING

(sorry about the messed up format. Read the story at the below link...it's easier on the eyes)

Google advertisers cutting spending


By Ben Charny

10:58 PM ET Jan 3, 2007

SAN FRANCISCO (MarketWatch) -- A growing number of online advertisers
are bidding a
partial goodbye to Google Inc.

Frustrated by the soaring price of Internet-search advertising and
diminishing
returns from the ads they buy, mid-sized advertisers say they plan to
reduce how much
business they do with Google this year -- in some cases, significantly.

Last year, for example, eBags.com co-founder Peter Cobb spent between
$5 million and
$8 million to peddle suitcases, handbags and other carrying cases
online. Google got
75% of that amount.

But this year it will get "significantly less," Cobb said. "The Google
percentage
has got to go down," he said.

In many cases, the cost of an eBags.com ad placed on either Google's
own Web site or
one of its affiliates now equals 45% of the price of the product it
promotes. That's
crimping the company's own profit margins and forcing it to look
elsewhere to market
its bags.

"We're testing print ads right now," said Cobb, whose company will
spend up to $8
million on ads in 2007.

Cobb was among a half-dozen Google customers -- all of whom spent
between $4 million
and $10 million on search ads in 2006 -- who told MarketWatch they plan
to spend less
this year to have their ads placed alongside Google's search results.

While losing a few million here or there may not be enough to impact
Google's
business -- which generated more than $7 billion in sales last year --
those
interviewed for this story say their sentiment is not unusual among
Google
advertisers of their size.

If enough of those companies curtail their Google spending, it could
begin to
depress the company's annual revenue growth rate, which is already
expected to slow
to 47% this year from 80% in 2006.

That growth rate is one of the primary reasons that Wall Street
analysts cite to
justify their price targets on Google shares.

Google is aware that advertisers are closely measuring the return on
investment and
"adjusting their budget and pending patterns according," Google
spokesman Michael
Mayzel said in an e-mail.

"As with any advertising medium, some advertisers are going to perform
better than
others," he added. "The majority of our customers continue to see
strong return and
value in our ad program."

New bidders driving up prices

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To a large degree, the dissatisfaction with Google's advertising is due
to the
phenomenal success the company has had in persuading other firms to
advertise their
products and services using Internet search keywords.

In search advertising, companies bid on the right to have their
text-based ads
placed next to search results generated by specific words and phrases,
such as "ski
boots" or "diamond earrings," that Internet users type into Google's
search engine.

The low cost of keyword search advertising relative to older media like
television,
radio or even local yellow pages has lured many traditional retailers
into
advertising online. That's created more competitive bidding for popular
Internet
search terms, inflating their cost.

While that's helped Google post phenomenal profit growth -- analysts
expect that its
net income rose 80% in 2006 -- it's made things tougher on many of its
advertisers.

Keyword search prices on many terms rose between 40% and 60% last year,
according to
advertisers like Dan Sackrowitz, chief executive of Bare Necessities,
which sells
lingerie online. He saw his Google ad budget soar 50% last year.

Jack Keifer, chief executive of baby goods provider Babyage.com, said
his search ad
costs more than doubled in 2006. As a result, he's refining his online
advertising
strategy, spending less on Google and more on comparison shopping
engines or niche
search engines that focus on his product categories.

The experience of Sackrowitz and Keifer has come to the attention of
Wall Street
analysts, even those who are bullish on Google.

"What has been good for Google has not been good for the companies that
buy
advertising from them," said Mark Mahaney, Internet analyst at
Citigroup who rates
Google shares as a buy. "Going forward, we see no convincing reason why
online
advertising costs shouldn't continue to rise."

Trouble turning shoppers into buyers

-----------------------------------------------------------------------

Meanwhile, there's also growing dissatisfaction with the return on
investment
provided by Google ads.

Advertisers pay Google every time someone clicks on their online ad,
yet they
benefit only if a consumer buys something after being transferred to
their Web site.

Most online advertisers are happy if their so-called conversion rate is
about 5%.

Yet Shmuel Gniwisch, founder of online jeweler Ice.com, got a
conversion rate of
less than half a percent for the $750,000 worth of ads he placed
through Google
during November and December, a key selling season for retailers.

For every 300 people who clicked on an Ice.com ad, only one actually
purchased
something, Gniwisch said.

"You couldn't get a worse performance," he said.

As a result, he's planning to cut his Google ad spending by 40% or
more.

The low yield is a reminder of how many clicks are not legitimate but
rather the
result of so-called click fraud. While Google officials have inferred
that the fraud
rate is in the low-to-mid single digits, some critics say it can be as
high as 50%
for some online ad campaigns.

Still, many Google advertisers say they've accepted click fraud as part
of the cost
of online advertising. See previous story on Google's click fraud
problem.

Changing tactics

-----------------------------------------------------------------------

Likewise, not all Google advertisers who've seen their costs surge are
cutting
spending.

Google's expansive advertising network and its No. 1 Internet search
engine still
make it a necessary part of any online campaign. Saying goodbye to
Google and its
huge audience is a risky move for advertisers.

Yet even those who will spend at least as much money on Google this
year as they did
in 2006 say their decision has more to do with improvements they've
made on their
own, rather than any increased satisfaction with Google's ad service.

Sackrowitz of Bare Necessities said he won't cut Google spending, but
only because
his company has developed expertise in converting clicks into sales.

"We're getting healthy enough returns, but it's a testament to how
we've done a
better job of converting shoppers to buyers than our competition," he
said. "We'll
stay the course, but I wish (keyword) prices were lower."

Google advertisers cutting spending

pocketrockets

"Yet Shmuel Gniwisch, founder of online jeweler Ice.com, got a
conversion rate of less than half a percent for the $750,000 worth of ads he placed through Google during November and December, a key selling season for retailers.

For every 300 people who clicked on an Ice.com ad, only one actually
purchased
something, Gniwisch said.

"You couldn't get a worse performance," he said.

As a result, he's planning to cut his Google ad spending by 40% or
more."

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Ouch. Sounds like a keyword selection problem to me. Doesn't sound like they are using many "buy" keywords. And who knows whether they are sending their customers to the right product pages from each of their ads.

Diorex

Great News for me, guess i need to contact a few of these guys about their affiliate programs.

Wow - just looked at Ebags landing pages and they are busy as hell. Dont try to sell every customer every product, sell each customer one product and dont overwhelm them with 500 links. They are using the same ad for every keyword I looked at. Product specific keywords dont land on the product specific pages, just generic pages, huge opportunity for improvement.

I cannot say it enough - it is not how big your Google budget is to drive traffic, but what you do with that traffic once you get it. Work on conversion and you cannot spend enough on Google.

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Diorex.com

Adsense Loser

It is an interesting article though.

A common myth is that people who browse google are 'ready to buy'

Not true

some are ready to buy,

but others want to click and compare

others are just tire kickers

and some click ads to drain a competitors budget

Adwords isn't some sort of gold mine or cash machine. Adsense is a cash machine (assuming you are smart and don't get banned)

__________________
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arz

My thoughts exactly. I just found at least one more niche to target.

Jon

Your copy and pasting skills need some work..

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Andrew

Here are my thoughts on the matter: *yawn*

Dio

Sounds like good news to me, prices will drop for the rest of us if all these big spenders pull out. The points about their landing pages and keyword selections have already been made, so it's hard to feel sorry for the guys who are spending millions badly.

__________________
The Next Big Web Thing

Rob_TID

A Ferrari is also pretty useless to a guy who can't drive.

Nicod3mus

The big boys will be cutting spending this year and probably for a few more to come but as new smaller businesses get into the game I don't see a whole lot of reason for concern from Google's viewpoint. But I agree with those saying prices will come down, I think they will for thenext few years slowly.

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barman

Competition is better for the customer. If google's death grip on PPC becomes too strong, and competitors like YPN and MSN are offering the same thing for less, then its gonna be better for all businesses using online marketing.

Although, it wont be good for arbi's as the CPC will probably plateau and eventually come back down to competitive levels. It will definitely take a while though so enjoy it why it lasts! (also i have no idea what im talkin about)

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pocketrockets

Yeah, I'm not sure why it formats it like that. I tried it several times with the same result. It seems to only happen when copying and pasting something from MarketWatch. I think it's from all the live, streaming quotes they have embedded within the page.