Adwords – Naofumi Kagami

Google’s Response to Accidental Clicks

Google recently described on their blog, some of the ways that they have been trying to rectify the “accidental click” problem, which some 3rd party studies have estimated to amount to 50% of ad clicks.

This is obviously a welcome move from the advertisers which have ultimately pay for these accidental clicks, but it also raises the question of a) is this enough from the advertiser’s point of view, and b) how much will this impact Google’s revenues.

To understand this, we have to carefully look a the constraints that are carefully worded into this article.

This only applies to AdSense: This article carefully mentions that all remedies and conversion rate improvements apply to display ads only. This does not apply to AdWords ads, the ads that show up on Google search result pages. Now the vast majority of Google’s revenue comes from AdWords. Google’s AdSense business is much smaller and hardly growing in revenue. Therefore we can conclude that Google’s remedies only apply to a small portion of their overall business, and it is a business that is decreasing in importance.
AdSense text ads are not affected: AdSense is comprised of a image ads and text ads. It is unclear which of these is a larger business. However, since banner blindness is well documented and users have learnt to not click on anything that looks like a banner ad, it is possible that text ads actually attract the bulk of clicks for AdSense. This article again carefully makes it clear that the enhancements only apply to the image-containing banner ads.

It appears that Google has restricted the improvements for click quality to the segments of ads which will impact Google’s revenue the least. This is completely understandable given that Google, as any other company, wants to increase revenue and profit, but it is also important that the current efforts will only fix a minor segment of accidental clicks. This means that going forward, there will still remain a significant number of accidental clicks, and that Google may again be pressured by advertisers to reduce these in the not-too-distant future. Although not necessarily a likely possibility, it would be particularly damaging if Google was forced to modify its search ad format (AdWords) to prevent accidental clicks from users who did not recognise that the links were actually advertisements.

Effectiveness of Online Ads

Jordan Weissmann an article that is very much in alignment with my views and experiences with online advertising.

“We Have No Idea If Online Ads Work: The Internet has given us an ocean of data. Turns out, most of it is pretty useless.”

Some excerpts;

Last year, a group of economists working with eBay’s internal research lab issued a massive experimental study with a simple, startling conclusion: For a large, well-known brand, search ads are probably worthless.

For instance, companies like to run large ad campaigns during major shopping seasons, like Christmas. But if sales double come December, it’s hard to say whether the ad or the holiday was responsible. Companies also understandably like to target audiences they think will like what they’re selling. But that always leads to the nagging question of whether the customer would have gone and purchased the product regardless. Economists call this issue “endogeneity.” Derek Thompson at the Atlantic dubs it the “I-was-gonna-buy-it-anyway problem.”

In the end, it all comes down to the evergreen challenge of distinguishing correlation (e.g., a Facebook user saw an ad and then bought some shoes) from causation (e.g., a Facebook user bought some shoes because he saw an ad).

This is exactly the reason why we stopped using AdWords for our antibody search service. Visitor numbers dropped, but our profits didn’t.

Maybe brands that are just starting out need to use AdWords. Maybe if they never gain brand recognition or loyalty, these brands might have to use AdWords forever. However, if your brand has managed to get some recognition, or if your product offerings are unique and listed high in organic search, it is very likely that AdWords is reducing your profit rather than increasing it.

Google and other internet advertising companies are telling advertisers how much data they have and how effectively they can target customers. However, as a recipient of these advertisements, I’m seldom amused when they blatantly show ads from websites that just I visited the day before. If this is all that big data can do, then Internet advertising companies have a big problem.