Is the once mighty Google going limp? Are the growth prospects of Google at risk? Are people clicking less on Google ads? These are the questions that haunt the investors who have shares in Google.
Google shares had dropped to an all time low and the report by comScore, the research firm, says that the reason is that there were less number of people clicking on Google ads this year in comparison to last year.
Analysts feel that the comScore report is a sign that Google, which is not in the habit of forecasting its future performance, is as vulnerable to the United States economic situation as the others, and certainly not impervious to the slowdown. According to one of them, “There are pretty strong signals now that the economic slowdown is having impact on consumers’ behavior online and therefore having a negative impact on Google.”
Wall Street analysts say that apart from the economy pulling it down, Google may be facing other issues such as perhaps getting too big to be able to gain any more market share, spending more than it can afford to, as well as facing major competition from the possible merger of the two chief rivals, Yahoo and Microsoft.
As of now, Google is still a highly profitable company that is out-performing all its major competitors. Google’s share in the United States online advertising market increased from 19% in 2005 to 28% in 2007.
Majority of Google’s earnings come from text ads, for which it gets paid only when users click on these ads. It is also pointed out that the unexpected decrease in the paid clicks reported by comScore could very well be the result of a conscious effort on the part of Google to ensure long-term benefit.
Some analysts feel that a part of the problem is self created by Google, because Google has reduced the area that can be clicked in the text ads, to ensure there are no accidental clicks. These accidental clicks used to earn Google revenue but they are of no value to the advertisers. This step towards helping the advertisers, seems to have proven costly for Google.
Recently, there were other measures taken by Google to improve the usefulness of its ads in order to attract better advertisers. For example, it ended all the contracts with websites whose main purpose is to carry ads that users are sent to when they type a wrong web address, as those ads give poor results for marketers.
Researchers say that most high-level marketers usually base their search advertising budgets on the value the clicks, in terms of providing leads or leading to conversions and certainly not on the number of clicks they get. They feel that if Google makes sure to weed out poor quality clicks, good advertisers will be willing to pay more per click.
Amidst all these theories, there are some people who go as far as to question the accuracy of comScore’s one-month report. Google’s chief executive, during a conference call to discuss earnings, made it very clear to investors that they had not at all been affected by the economic slowdown.
The positive thing is that, overall, no negative impact has yet been seen, despite the various rumors and predictions of recession in the future. A section of the analysts feel that investors are overreacting to data by worrying. They feel that the weakening of Google’s growth is inevitable given Google’s growing size, and nothing to be alarmed about. Google will also be able to gain the momentum in its earnings, if they cut their spending a little.
For the common user, the Google clicks continue to hold fascination and help in search of his pursuit for information.