The truth is always more complex: Google search ads doing just fine

A few days ago we were skeptical about whether the recent descent of Google’s stock price meant anything. A new report by comScore today suggests that the company’s recent drop in paid-click numbers may not be cause for worry at all, and instead may reflect improvements in their business model.

The company’s stock suffered a huge drop three days ago as a direct result of a decline in paid clicks and a leveling off of growth in that field overall. Yet according to comScore’s report, those results were a direct result of Google’s own initiatives meant to improve the quality of their advertisements.

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These initiatives actually led to a reduction in the number of paid listings for 2007 — so it’s hardly surprising that click-through numbers would go down. Yet since the ads remaining are now more relevant to the consumer, revenue per click actually went up, offsetting what normally would be monetary losses of such changes.

ComScore’s researchers note that they would not be surprised at all to see this trend continue into 2008 — paid clicks go down, but revenue remains steady or improves.

Some might think that an increase in the quality of advertisements should lead to an increase in clicks for Google, but this can be debunked as well. If ads are more relevant, a consumers need fewer clicks to find what they’re looking for and thus won’t have to repeat searches that result in new ads for them to click on.

The data also indicates that those who think the poor economy overall is ruining paid click rates are wrong. After all, why would paid click rates have gone up for other search engines besides Google (as separate comScore data shows)? Unless you want to make the argument that in a poor economy consumers only stop clicking on Google ads, you’re going to have a hard time selling that point.