Google AdWords, PPC Industry Becoming Far More Cut Throat

May 15th

iProspect recently did a study which showed that the majority of people who respond to graphical ads do so via a latent action other than a click on the ad, like a search for the brand. Any such brand lift or indirect effect of advertising on content sites has generally been ignored by most advertisers because search driven ad networks want search to get credit for that conversion.

As these ad networks & search companies become more ubiquitous (going so far as creating a web browser that replace the address bar with a search box) search will get credit for many conversions that were going to happen even if those search companies did not exist.

As ignorant ad dollars have flowed online to this precision trackable environment, it is driving an increase in click fraud

Reggie Davis, vice president of network quality for Yahoo, says he believes that Google’s click fraud rate of less than 1 percent is not accurate. “We’ve disclosed that our rate, before hiring Click Forensics, was between 12 and 15 percent,” a number that includes invalid clicks, or traffic that an advertiser should not pay for, he said. According to Outsell Inc., an information industry research group, 13 percent of the total of online advertising clicks were fraudulent last year.

Even campaigns that were doing well are finding more garbage appear overnight. About a month or so ago I cleaned out some of the scammy sites from my content targeted ads. Some of which

  • stole over $1,000 from me
  • with abnormally high clickthrough rates
  • were PageRank 2 "search engines" that I never heard of, and
  • consisted of no technology other than a Google search box, and a $5 logo

I usually am more mindful of tracking that stuff, but was not recently, and when Google ramped up my traffic on the content network they simply ramped up the fraud.

In this increasingly competitive environment (where, if you have scale, you need a full time employee to manage fraud) many businesses are shifting from pay per click advertising to search engine optimization, as shown on Google Insights for Search.

Not only are businesses shifting to organic search, but so are customers. Hitwise reported:

Hitwise data indicate that the share of search traffic coming from paid listings is decreasing at the expense of organic traffic. In the four weeks to May 9, 2009, 7.25% of search engine traffic to All Categories of websites was from paid clicks. This compares to 9.84% in the same four week period in 2008 - representing a 26% decline in the share of paid clicks.


What caused such a sharp fall off? In part, some businesses stopped advertising on their brand related keywords.

0.83% of searches for "home depot" went to a paid listing in the four weeks to May 9, 2009 compared to 39.06% in 2008. Similarly, "usaa" saw 0% of clicks on paid listings in the last four weeks compared to 28.88% in the same period in 2008.

In the past we mentioned that this brand bidding was typically a money waster.

How is Google responding to this cutback in brand spending? They are now allowing branded keywords to trigger ads in 190+ more countries AND they announced that they are going to allow advertisers to use brands in the ad copy in the US next month!!!

The hope is to increase Google's revenues by

The first group of ads that will be able to qualify for this new ad channel are:

  • Ads which use the term in a descriptive or generic way, and not in reference to the trademark owner or the goods or services corresponding to the trademark term.
  • Ads which use the trademark in a nominative manner to refer to the trademark or its owner, specifically:
    • Resale of the trademarked goods or services: The advertiser's site must sell (or clearly facilitate the sale of) the goods or services corresponding to a trademark term. The landing page of the ad must clearly demonstrate that a user is able to purchase the goods or services corresponding to a trademark from the advertiser.
    • Sale of components, replacement parts or compatible products corresponding to a trademark: The advertiser’s site must sell (or clearly facilitate the sale of) the components, replacement parts or compatible products relating to the goods or services of the trademark. The advertiser’s landing page must clearly demonstrate that a user is able to purchase the components, parts or compatible products corresponding to the trademark term from the advertiser.
    • Informational sites: The primary purpose of the advertiser’s site must be to provide non-competitive and informative details about the goods or services corresponding to the trademark term. Additionally, the advertiser may not sell or facilitate the sale of the goods or services of a competitor of the trademark owner.

As a brand owner how can you possibly police all the shady ads that will be delivered on the Google content network? You can't. But you can try to outbid everyone else for the brand equity you already built, and hope that your ad appears. And that whole "informational sites" category is quite blurry. Watching how it evolves will reveal some surprises.

Trademark owners are generally unimpressed with the direction:

“I know of several companies spending millions of dollars a year in payments to Google to make sure that their company is the very first sponsored link” on searches for their own names, said Terrence Ross, a partner at Gibson Dunn, who represented American Airlines in its suit against Google. “It certainly smacks of a protection racket.”
...
“It is inappropriate for Google to sell my trademark for a profit,” [Ms. Spangenberg] said. “It really misleads our customers and our potential customers.”

Eric Schmidt stated "brands are how you sort out the cesspool," and yet his company is willfully misdirecting consumers searching for brands.

That says a lot about their business strategy.

Published: May 15, 2009

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Comments

May 16, 2009 - 6:35pm

Seems that more people are catching on to the value of SEO, which means more work for SEO consultants. So this should be a good thing.

May 16, 2009 - 9:29pm

A lot of click fraud comes from the "domain parking" biz, especially those parked domains powered by Yahoo's PPC feed.

Yahoo's backend is really crappy and not able to detect the stuff that Google can.

From personal experience, and as the accounts supervisor at Maxxximize.com --- I can tell you that less than 5% of all new account sign-ups to our service are legit. 95% +++ are from click fraudsters (chinese, russian, turkish, etc) looking to get in on the action and game us.

They run very sophisticated operations.

I wish I had more time to elaborate.. Maybe for another post.

Last thing before I head out... You really have to watch your own back. Gotta stay on top of this things. Day in and day out. If you don't --- you will be sorry!

All the best,

Mike

May 17, 2009 - 9:00am

I am not surprised that 19 out of 20 potential "publishers" are scammers. Likely 15 out of the 19 are just 1 operation that keeps prodding for holes.

There are far more people in the world than there are people who want to EARN a living. Given the corruption in government and business + the anonymous nature of the web it is not surprising that we are building a web full of scammers.

"When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time, a legal system that authorizes it and a moral code that glorifies it." - Frederic Bastiat

May 18, 2009 - 5:30am

Yup, that is correct.

Also, the funny part is... They just don't stop or ever take a day off! They have been going at it for almost 1 year now more or less.

Our service launched publicly in June of 2008.

The scammers have probably submitted close to 50,000 applications

The funniest part?

We don't even do anything with PPC (strictly pay per sale) but they still keep submitting applications with fake info, unregistered domains or other peoples domains, etc... Go figure?!

It's the domain industry's dirty little secret at any case where you don't hear much about.

The day that all parking companies are shut down for good... Ahh. It would be a beautiful thing for all search engine marketers.

Unfortunately, Google + Yahoo make out with too much money and need each and every cent. Fraud is just part of the system. You take it out, and there will be a lot of chaos.

Dark times we live in!

May 19, 2009 - 7:32pm

@Aaron That Bastiat quotation describes the shady side of affiliate marketing to a tee (except they're not [yet] in Congress).

May 19, 2009 - 10:51pm

Or, you know, the banking system.

Socialism for the rich! Capitalism for the rest

May 21, 2009 - 5:54pm

For most forum sites, I find that I have to block all the IP ranges for Russian/Eastern European countries. And once I do that, things go swimmingly (i.e. no spam).

May 17, 2009 - 2:55am

It's going to be really interesting to watch this open season on brands unfold within Google.

Seems to me like some of these latest developments are really opening the door for a potential coup in the search engine space...Google has a huge advantage in terms of monetizing and sheer computing power, but their push to continue driving increased revenue and profit could prove to be their undoing.

May 18, 2009 - 7:48am

Google's getting more and more desperate to squeeze every red cent out of advertising.

I can imagine the conversation at Google:-

Schmidt: We need to innovate and get more revenue streams. R & D team, come back with new business models

R & D Team: Sir! Yes Sir!

....one year later, new business models created and deployed.

....two years later:-

Schmidt (thinks): Damn these new business models - they never make us any profit. Time to pull more levers on the advertising machine

May 18, 2009 - 1:12pm

>Seems that more people are catching on to the value of SEO, which means more work for SEO consultants. So this should be a good thing.<

I wish I were as optimistic. Do we not all fear that seo will soon have no real distinction from PPC? Is it possible that search engines plan to create an environment where SEO and PPC are one and the same and eliminate organic results as we've accepted them for the past 2 decades?

Case in point. Where is the faint blue shading that used to separate the sponsored listings at the top of the left hand side from the organic results? Now finding the paid from the organic is even more obscure than ever before. Where the hell is the FTC now?

Has anyone noticed the "new" blended results that include a heavy bias toward directories and online phone books?

I NEVER out anyone, (except search engines of course), for ANY thing so I'll keep it generic but do a search for plumbers
http://www.google.com/#hl=en&q=plumbers&fp=Q5rYJf3FIq4 or for roofers
http://www.google.com/#hl=en&q=roofers&fp=Q5rYJf3FIq4

Of course yours maybe a little different since I'm in OKC but most of my results show me a LOT of paid stuff for Dallas and I'm sure you will also benefit from there technical superiority that is geo targeting.

The point is -- see how difficult it is to tell the sponsored from the organic? Then you have the local then you have superpages, yellowpages, localized diretories, ezine sites, Press release sites etc.

VERY few plumber/roofer company websites, seo'd or otherwise.

Who wants to go to a search engine, do a search and get sent to another search engine? Makes no sense does it? Or maybe it makes a lot of sense depending on who's asking the question.

If you do the same plumbers or roofers search using any city name in front or behind it, the situation looks even worse.

We all know I'm crazy but it sure looks to me like organic seo is not about optimizing web sites for organic results. It appears to me that Google is trying to promote the concept that seo is about optimizing PPC campaigns.

That would certainly help eliminate that us against them philosophy wouldn't it?

I don't think we're living in dark times as I really don't know how my life could get much better right now, BUT I do think Google has absolutely no regard whatsoever for anyone or anything other than themselves and their, "becoming more obvious everyday" goal of total global domination in any field that involves commerce or the dissemination of information. I also think they are still hiding behind a cloak of technology that few lawmakers understand to obfuscate their true intentions and subvert virtually every anti-monopoly and fair trade law on the books.

Just like almost every other American corporation that has the resources.

Imagine a world with Sam Walton owning 700,000 servers!

Massa

May 19, 2009 - 7:35pm

Fantastic writing there Bob. Geez that was insightful!

This line in particular is bang-on:
"I also think they are still hiding behind a cloak of technology that few lawmakers understand to obfuscate their true intentions and subvert virtually every anti-monopoly and fair trade law on the books."

May 18, 2009 - 7:54pm

I agree with you 100% Bob. The main reason for "universal search" was not for the user, but to...

  • give Google a wedge that they can use to enter new markets and influence particular markets they want to enter in a deeper and more meaningful way
  • give Google more ways to blend ads into the "organic" search results
  • allow those ad units to evolve beyond text if another format is more responsive / more profitable
May 18, 2009 - 11:13pm

As Google's getting desperate to maintain their earnings (by cutting payout to AdSense publishers - check their last two quarters' rev reports), here's a place that's doing it right. adMarketplace isn't cutting payouts to small publishers, and they've just announced, pubMarketplace - a direct AdSense competitor:

[edited: please email us if you would like to buy advertising on our site]

May 19, 2009 - 12:03am

>I agree with you 100% Bob.<

So what's it gonna take to get the FTC to read up on internet related technology and do what they get paid for?

@segrantAMP

enthusiastic applause for that creative link drop. I'm impressed. That was just damn near relevant to the topic.

>rushing out to join that killer admarketplace! Boy am I glad he let that slip out ;-)

massa

PS
maybe it was just my box but now I'm seeing almost invisible pink shading behind the sponsored results above the organic stuff. hmmm. the same day I mentioned it on aaron wall's blog. what a co-inky dink.
Peach y'all

May 19, 2009 - 1:59am

So what's it gonna take to get the FTC to read up on internet related technology and do what they get paid for?

Well if we look at the SEC we would guess that the FTC board members probably have market positions in Google and will ignore any issues until complete market domination is locked up.

May 19, 2009 - 7:31pm

"many businesses are shifting from pay per click advertising to search engine optimization, as shown on Google Insights for Search."

You're inferring causation from correlation. Yet your own graphic offers another plausible explanation: People are becoming more sophisticated and searching for AdWords instead of PPC.

You may have other data points to back you up, but that one doesn't do the job, imho. Furthermore, Google's position has long been that maximizing the risk inherent in SEO (no guarantee you'll rank me? wtf omgz!? and now it's harder because of Universal SERPs, SearchWIki, Personalized SERPs, vertical search etc) maximizes PPC spend, which contradicts your point.

On the other hand, you make a compelling argument that by growing the value of AdSense/DoubleClick, by directing more traffic to publishers in their ad network, Google has an incentive to promote SEO too. I also like your explanation for Universal search, which I'd never thought of before...

May 19, 2009 - 10:57pm

Look at how the gap between AdWords and SEO has increased over the past 2.5 years ... that is non-trivial, especially when you consider how sharply PPC has fallen off over that time as well.

I don't think Google has an incentive to "promote SEO" but they do have an incentive to "whore out whatever ranks well."

The AdSense team wanted to "optimize" one of my friend's websites, and the ad placements they suggested were so offensive that the site would have eventually lost momentum and lost rankings. That is ok for Google though, because they would look at the next site that comes up and try to "optimize" it as well.

They can keep burning everyone else's stuff with virtually no risk to themselves, because as the central network they can pick and chose who they want to rank and they will always have more competing sites to chose from.

Cynical sounding? Perhaps. 100% honest? Yes.

May 20, 2009 - 11:01am

Massa made some good observations.

Seems to me that arbitrage is back, only this time it's not the obviously sleazy fly-by-nights, but companies with more resources behind them - the yellow pages types, the city listings. Sites that look credible in the SERPS.

BUT ... it's a form of short-term pollution. I would have thought users would get tired of going to these sorts of sites.

May 21, 2009 - 5:51pm

I have found that PPC is a total waste of money. Usuially your price per click ends up being so high for most terms that you end up loosing money on any converted traffic. You add to that the amount of click fraud you get, and the amount of time you have to spend to monitor all of this crap and it ends up not being worth the effort.

May 24, 2009 - 11:45pm

Aaron, you make some good points but, you also left some important info out on the decreasing CTR for ads. The drop in clickthroughs is also affected by people putting the wallets away and that goes for not just Search but seemingly everyone but Walmart. They still search, they just do more of it before actually buying. I think the Trademark stuff is more Google BS and only a fool will buy them but... there's lots of those in this industry!

How about the fact their own recommendations are to separate search campaigns into separate campaigns for Google and the the content network... yet they turn the content scam on by default, knowing it's going to be a drag on profitability? I'm generally not paranoid... but .. when Google says "we're doing this for users"... I know what they are really saying is profit is down "we gotta find new revenue". I don't think it co-incidence that Quality Search came when it did and supposedly "to remove arbitrage". Arbitrage continues but was decreased to a small degree, bids go up by 15-20% indicating that it's not a true auction but a blackbox that Google uses to turn the revenue knob as required to meet Wall Streets expectations.

May 25, 2009 - 5:04am

I totally agree Terry. There are some keywords with 0 competing bidders where I have a 17% CTR and Google still wants about 15 cents a click. No real market based pricing floor...simply price gouging.

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