A Jan 3, 2007 article from MarketWatch says:

“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. ”

The article cites click fraud (to a degree) and the entry of newbie paid search advertisers bidding wildly as partial causes for inflated per-click prices at some of the profiled companies such as Ice.com and eBags.com.

In the case of the “newbie” - it’s supply and demand - the more advertisers that want to be in paid search, the more competitive the click prices will get. In my experience, I’ve seen anecdotally that new advertisers may come in on a keyword group, bid the prices up, see poor results, and drop off - then keyword prices level off. So it’s not a consistent thing necessarily. And click fraud? Yeah, it happens… I won’t go there. That is another topic altogether.

Another reason cited for a decrease in spending by some advertisers is more encouraging however. Companies are getting better at generating conversions from their paid search clicks, either by bidding more smartly on their keywords, or improving the conversion process on their site so that their spend is more efficient. Keep it up!

Posted in: Default | Search Industry Trends