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Google Wants Companies That Focus On Market Share
Just My Opinion
ppcads




msg:1109585
 5:02 am on Dec 10, 2005 (gmt 0)

Being involved with Adwords since its inception as a direct advertiser (business owner) and as a part of an advertising agency (as an analyst) it is my humble opinion that google is going the way of the offline media giants (time magazine, NBC ect): in wanting companies that focus on market share first and profits later. These companies spend more, spend consistently (less seasonality worries) and are easier to manage.

Now that the search engine environment is starting to mature with Yahoo, Google and MSN being the big guys (ask.com will stay a tier II), their large market presence and quality of inventory (searchers) becomes an expensive commodity and they know it. Just as big newspapers and magazines can charge ridiculously high prices for ad space because of their prized demographics, number of subscribers and high visibility, Google and the others can do the same.

The "quality score" is just an excuse to artificially raise bid prices. Sure a few keywords will be cheap, especially brand words, but in the end its a losing proposition for most small companies, they dont have the time nor the resources to make sure their copy, landing pages and all keywords are relevant all the time. Eventually CPCs will rise so much that those guys will be priced out, leaving the big companies that can afford to pay that high.

They realize its alot more profitable to have a few big companies with the budget competing for the top spots then a hundred small ones doing the same. The former understands the importance of market share and will spend the money and get into bid wars for the visibility, the latter will have a price ceilings and the revenue they bring will be unreliable as some of them will go out of business. Moreover the little guys focus on profit and not spend as much during down times, which would hurt googles financial statements (they do have share holders to satisfy after all).

Another reason is that its easier to deal with the big companies than the small ones for the same reasons. Google can much more easily convince a sears for instance to be #1 even on ROI poor terms for the market share than a "Mom And Pops Place" web site. And besides, why would they want these small sites anyway? They are unpredictable, Google wants the big clients to be happy and not worry about these little flys eating away at their market and more importantly, their budgets. A happy client is a very profitable one for them.

A company that can spend 10 million and understand the importance of market share in search is much more valuable than 10 companies that spend 1 million but focus on profitability first. That's why they are trying very hard to take the fortune 1000 companies away from the interactive agencies, I've seen it myself, these guys are cunning and ruthless.

Look, I know Google was supposed to be "different" but they have to make money and make wall street happy. What they are doing is good business sense for them, but it sucks for us. In a year banners will start looking like a cost effective high converting solution for us in comparison search :)

 

Manga




msg:1109586
 6:06 am on Dec 10, 2005 (gmt 0)

ppcads that is the best analysis of what is happening that I have read so far. Great post. Makes perfect sense.

ppcads




msg:1109587
 10:08 pm on Dec 10, 2005 (gmt 0)

Thanks Manga!

I just think it should strike us as strange that Google is so opague when it comes to their so called "quality score". I understand that they don't want some companies to take advantage of their system who don't have relevant offers, however that will always be a problem in any market (heck its still a problem for Google). The great thing about the market place is that eventually those inrrelavant companies do not survive and the market corrects itself. In the big picture, the good companies, with good business models and a good offer, wins more. Besides which, one can argue that Overture's paid results are just as relevant if not more so, than Google's sponsored and their system, at least for now, is crystal clear.

If Google really wanted a great "user experience" and excellent relevancy, they would open it up for all advertisers to see. So that advertisers know exactly how to craft their offer in the copy, landing page and only chose relevant keyterms. Then, we would all compete in a fair PPC environment in which we know what the other is bidding and know exactly the best way of improving the "quality score". Perhaps after looking at the numbers we see that our greatest need is improving copy, landing page or simply chossing better key words, not necessarily paying more. And as Google always say's better pages and copy equals a better user experience, so we all win! This cycle would be infinite with the winning companies being the ones that have great sites and offers, not the ones that just spend a ton.

But there is no way Google would level the playing field between the small companies and the big companies like that for a number of reasons. One, having a transparent system would mean bids would be lower, its no surprise that bids in Google are routinely 3x's higher than overture, even though overture arguably returns a better ROI in most industries. Right now most companies don't really know how to raise their quality score other than raising their max bids, and since they dont know exactly how much they are paying, CPCs have skyrocketed (Google prays on our ignorance to make them rich). Two, it would be foolish to allow the big businesses to compete with the small ones on that level, Google wants them to spend money on bids not on their landing pages, they ant us to worry about landing pages cause they know we dont have the almost infinte funds the big boys have to just have a very high max bid. Three, wall street would have a fit if they found out the marketplace was fair, thats less revenue for the reasons I outlined in my earlier post.

I have to hand it to Google, they perfected the model, they tell us what to bid without any guarantee of position, the bids themselves fluctuate greatly even on a daily basis and we really have no idea why, and we have to rely on them to figure out how to get the most out of our campaigns. BTW, their answer to that last statement is always the same, turn on content, bid higher, and change your creative to get a higher CTR (of course we know CTR and conversion rates usually have an inverse relationship), funny how all their "solutions" equals us having to spend more and pay a higher CPC.

Hey I know there are alot of Google fans out there (heck use Google all the time)and they wont like my posts, but at the very least we need to start questioning Google on these issues, just because they say it will be beneficial does not make it so.

blaze




msg:1109588
 12:49 pm on Dec 12, 2005 (gmt 0)

Interesting but-

The more irrelevant AdWords becomes for searchers, the less likely they are going to click on those ads.

Google needs to keep the AdWords relevant and useful for people searching. If the Ads just become marketing fluff that doesn't serve up beef, then they'll just enter into the blind spot of searchers and the value proposition will plummet alongside Google's bottom line.

toddb




msg:1109589
 1:40 pm on Dec 12, 2005 (gmt 0)

The only problem with this is broad match and big wallets are not going to give better results. Deep pocketed companies going for market share with no eye to ROI are going to broad match for more exposure. And add words that are close, etc. to get the eyeballs. This leads to less targeted adwords and a worse user experience.

I too, see the pressure to be bigger. Access to reps does not kick in until a certain level. Then you get your own rep after certain levels. This is all pretty important if you ever have an issue.

Jack_Hughes




msg:1109590
 2:36 pm on Dec 12, 2005 (gmt 0)

i can't think of any large company adverts in my sector that provide a good experience.

in my keyword area, people already know who the big spitters are, because they are very well known by everybody. they would appear to go to google to see if there are any alternatives. if google is dominated by the same players then my suspicion is that the searcher would be left unsatisfied in many instances.

ppcads




msg:1109591
 2:39 pm on Dec 12, 2005 (gmt 0)

"Google needs to keep the AdWords relevant and useful for people searching. If the Ads just become marketing fluff that doesn't serve up beef, then they'll just enter into the blind spot of searchers and the value proposition will plummet alongside Google's bottom line. "

You hit it right on the button, the only monkey wrench for Google in this whole process is that "value proposition", or what I like to call "brand perception". Most believe Google delivers great results, I do too and the little guys definitely can give good offers tailored to what the searcher is looking for however, for most verticals, the big companies can deliver the quality of ads searchers are looking for at brands they know.

Lets use Sears (or circuit city, or home depot for that matter) again as an example, they must have thousands of products, if they send each to a product landing page isnt that just as relevant? Moreover, since Sears is a well known name (hence trustworthy), it only makes it more relevant to the user.

And since there a good number of big brand companies out there, Google can still deliver variety for those looking to find the best price, quality, service ect.

"if google is dominated by the same players then my suspicion is that the searcher would be left unsatisfied in many instances."

That is a good point, I hope Google recognizes that. Differentiation is what got them market dominance and consumer loyalty

blaze




msg:1109592
 12:00 am on Dec 13, 2005 (gmt 0)

Yeah, it's going to suck for middlemen, I have to admit that.

Distintermediation in a big way, unfortunately.

ppcads




msg:1109593
 3:40 pm on Dec 15, 2005 (gmt 0)

From Adwords Help Center:

"Quality Score

This is the basis for measuring the quality of your keyword and determining your minimum bid. Quality Score is determined by your keyword's clickthrough rate (CTR), relevance of your ad text, historical keyword performance, the quality of your ad's landing page, and other relevancy factors."

That "other relevancy factors" really miffs me. We can do everything right and still pay more overall (save for a few keywords here or there) and google can use that "other" factors as an excuse for charging excessive bid prices.

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