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|Change in quality score - Open Letter to Google|
google cpc increase, quality score, adwords cost increases
| 4:31 pm on Mar 28, 2008 (gmt 0)|
I got a well intentioned note from my Google rep yesterday. She has proven to be an ally and an asset in many instances over the last year, so this is not reflective of her in any way.
The email, coincidentally, arrives the night before ComScore announces that Google clickthroughs are not rising as fast as in the past and are, in fact, almost flat. Where will the future revenue growth come from? How will Google get back to their winning ways? Perhaps they intend to get more out of their current clicks? Doing so wouldn't be an unusual business tactic as there are really only 3 ways to grow revenue:
1. Get more customers
2. Have your current customers come back more often
3. Charge your current customers more
Google seems to be running out of 1 & 2 so the logical course would be to do 3. Are they? I am not here to say definitely, as I have no way of knowing, but this evidence, now and in the past, certainly points to that.
The gist of the email I received was that Google is making an adjustment to their quality score measure. They don't expect that we will notice much difference except, perhaps, for a "slight increase in CPC."
I was reassured that they will keep an eye on my account and encouraged me to call if I saw anything "drastic." Um... like what? My CPC has gone up 50% in the last year. Is that drastic?
Google People, I would be naive to think that you are unaware of the wide gap between "max bid" and "actual CPC." This must look like a giant cash reserve to you. One which you can simply go to when the numbers are off or you need a quick fix. Certainly your "black box" AKA "quality score" must have the appropriate dials built in to tap into this potential. Further, what options do we advertisers have? Are we going to stop advertising on Google?
The questions I have for you are these:
1. You have always justified any action that may increase CPC by promoting the corresponding improvement in the system or quality of results. Skepticism aside, are the results better now than they were a year or two ago? I would argue, as objectively as possible, that they are not. My CPCs are up 50% in the last year, not all due to you for certain, but are the search results 50% "better?" Note that this current change came without any pretence even of "improvement."
2. Do you realize that we advertisers are increasingly focused on ROI (many of us have been for years) and that our max bids are not necessarily reflective of what we can afford to pay? Since the system you created is so cloudy, we often enter bids well above what we could afford knowing that our resulting CPC will be in the ballpark of where we need to be. Obviously at some point we will run out of ability to simply suck it up and this drop-dead point is well below our max bids in most cases.
Anyway, anyone who has made it though this absurdly long post obviously has some skin in this game and probably has some of the same feelings and questions I have. Would love to hear the conversation furthered by your responses.
| 5:57 pm on Mar 28, 2008 (gmt 0)|
My thoughts exactly! Well written!...KF
| 6:13 pm on Mar 28, 2008 (gmt 0)|
First of all, thank you very much for sharing this with us. It sounds like you feel the pain.
In addition, thanks for well weighted and worded post.
|My CPC has gone up 50% in the last year. Is that drastic? |
Something that many are simply ignoring, even while hurting their own business.
Product and service prices went down in many cases, affiliate commissions are the same for years – meaning – lower or no profit at all.
|wide gap between "max bid" and "actual CPC." |
Per Google, “max bid” is something an advertiser is willing to pay, no arguing with that.
At the same time, Google has created a system where you are FORCED to bid THAT MUCH, in order to gain a certain position and pay half or less of your max bid. It was not us that simply decided we will bid THAT MUCH.
Over the time, with advertisers liking FREE stuff like AdWords’ conversion tracker and Analytics, Google has gathered all information needed, which has reflected in the idea of taking another percentage out from advertisers’ profit.
In some cases, you pay $0.35 per click on average, while your earning per click is over $1.
Google says “Heey” … “Heeeeey” … “Heeeeeeeeey”…
Now, some of my own pain, reflecting many people that participate in this forum, and wider.
We, companies that are in affiliate business, get hit even harder.
With existing increase of an average CPC over the time, same commissions over the same time, we’ve been forced to start shutting down many of our campaigns.
Merchants have not been able to recoup all these sales being lost in the “somewhere”.
It looks like it is the time for a big swing in business model. Not right away, but almost there.
Furthermore, we know AdSense earnings have been down for long time now (few months).
There are numerous posts about how Google has become flat in earnings, how CPC has gone up, how a number of advertisers are getting squeezed out based on low QS their sites get and keywords get “killed”.
Now, finally, your questions:
1. I fully agree with you. Things are very bad for everyone. Based on that, what’s the point? Who actually benefits here? I don’t see that even Google’s users do.
2. I do realize that, 100%. But… but… until Google offers a system where we can assure our position with no such gap, we are forced to do it. Why? Well, if I decrease my bid in order to reflect what I want to pay, my ad goes down dramatically. If I increase my bid, I pay just bit more and get my desired position. It’s about system, not my dumbness about my max bids.
Finally, since their message mentioned “adjustment to their quality score measure” and “slight increase in CPC.", why would they send this to you or anyone else anyway? We all saw increase in average CPC over the time with no special messaging about it. Is there anything else in that email? Why do you think was sent out? What would happen if they did not send it out?
| 6:16 pm on Mar 28, 2008 (gmt 0)|
| 5:15 am on Mar 31, 2008 (gmt 0)|
At some point, the market for clicks hits an equalibrium point. The maximum number of advertisers enters the market, they know what they can pay and Google reveues flatline on PPC.
There is probably a minimum number of advertisers per keyword that Google needs to maximize revenue or to ensure a revenue per search of $XX on a given keyword or category of keywords, or that X% of clicks go to paid listings vs. organic. It's probably between 8 and 32 (1 to 4 pages worth of ads).
When the equalibrium point hits, there is pent up demand in the marketplace for more qualty clicks at a given CPC and an opportunity for a new company or traffic source to provide them. Tinkering with the minimum bids will only go so far and then if Google wants to increase revenues it needs another real revenue source.
They can probably raise the CPC they make somewhat by quality scoring out some smaller advertisers with lower bids and broadmatching higher paying ads to replace those that are priced out of the market.
If you have 3 years worth of Analytics data in Google Analytics, what would you do if they said we now charge $#*$! per month for analytics, optimizer, whatever else? Or maybe you have to maintian a minimum spend to get free analytics...
There are definitley additional levers to pull.
| 6:18 pm on Mar 31, 2008 (gmt 0)|
Only up 50%? Consider yourself lucky. While this post is great for reiteration purposes, Google has been pulling this "stuff" since their IPO. There are 2 Google's; pre-IPO and public Google. Yes they will probably continue to get even aggressive with their pricing policies, but as an advertiser who has fought Google for 5+ years all I can say is get used to it or get out. Google holds all the cards; venting is great, but will never change anything. I learned about 2 years ago to expect the worst from Google (when it comes to rising prices and 0 transparency), learn to do the same is all I can suggest. You have no idea how much better your physical and mental health will be :)
| 7:07 pm on Mar 31, 2008 (gmt 0)|
avalon, just to be clear I have been working with\against Google since before adwords. I am lucky in that I have always worked for large enough advertisers to have dedicated reps. Clearly this has provided me with more access than 99% of their customers could even hope for.
I understand your point completely and recognize that I am, to a certain extent, yelling into a hurricane. That said, I don't think it completely accurate to call this issue a pre\post IPO thing. I think the lack of transparency started soon after adwords launched and would argue that the flaws in Google's structure are more complex than simply a result of them going public. The same "pay attention to what I am doing over here so you don't see what is going on behind my back," stuff has been normal operations for them as long as I can remember.
My post was spurred on more by a seemingly slight change in "presentation" on Google's part which I see as a dangerous precedent.
In the past google has always said it was making changes for the betterment of the results or product. Experienced advertisers could usually see through the thin veil of pretense, but at least you could see the rationale on their part. Quality score itself is a good, if flawed, concept that should reward advertisers for doing their jobs well, for instance. Of course the secrecy with which it was presented and the resulting increase in CPC made us all look at is with a great deal of skepticism.
In this case there wasn't even the pretense of an improvement which, to me, is just plain alarming. Everyone I know in the search industry has looked at Google's stock price with a bit of a chuckle. What were these investors paying for? For goodness sake, there is only one revenue source! Well, the time where we will be proven right looks like it might be here and we are all going to suffer for it.
Lastly, I don't know what your CPCs are, but mine are well over $5 and YOY changes had been in the 10-20% range until this last year. I am in a mature (online) and highly competitive space, so we are all pretty close to our "real" max bids at this point. A 50% increase in CPC represents hundreds of thousands of dollars a year.
If we are going to have google artificially raising pricing without even attempting to improve anything in return, how much more frequently will they be making these changes. In my opinion, once you start down that slope there is no going back and every change tends to become more and more bold as one becomes more and more desperate.
Thanks for the dialog!
| 8:26 pm on Mar 31, 2008 (gmt 0)|
I, like many others feel the pain. My 'rantings' would be almost word for word with your post. However, I look past that and ask myself "Did WE create the problem?"
Over the years we have been provided all this 'free' tools that continually open up our business models to the search engines. For example Conversion tracking, and even worse, analytics. We essentially walked into the car dealership and told the sales guy how much we want to spend. If you didn't (like me), your competitors most certainly did.
This opened up our web based profit margins to the SE's for virtually every vertical. Maybe it's time we tracked our own visitors and looked at our log files (like the good old days). The only thing that's changed is how much info we provide the SE's.
| 1:13 am on Apr 1, 2008 (gmt 0)|
It's the old "don't pee on my leg and tell me it's raining".
If Google were to say, "demand is up so we are raising CPC prices by 20%". We would hate it, we would vent but at the end of the day we would either pay or leave.
The problem is Google is saying, "don't worry- we're helping!" while raising prices 50-500% for some people.
I just read a story today where Google is creating a private search for the CIA...any doubt that Google can do whatever they want?
| 3:50 am on Apr 1, 2008 (gmt 0)|
Like I've said before many times you can only bite the hand the feeds you for so long.......in the end....well you know...you will go down.
I agree with the post above about the Pre and Post Google....
There was a time 3 years ago where my rep was calling me on a regular basis...... I was spending hundreds of thousands a year.
Then the quality fiasco and everything stopped over night.....making a call to my rep was like talking to a different person...it was the same person but he sure acted different.... The attitude was like.......Sorry but we really don't give a cr*p.... tough luck.
Many say all the time to "Buck up" cause Google is and will always be the top dog.....
I disagree with this... For many Google is becoming the "enemy" to many advertisers. It's really a matter of time. If current policies remain I really see someone else taking over.
Many think this could never happen..... many forget others who had a monopoly and lost it.......any one remember Netscape?
My 2 cents....
| 10:53 pm on Apr 1, 2008 (gmt 0)|
Beautiful posts everyone, especially Brian Waldman & smallcompany!
|Everyone I know in the search industry has looked at Google's stock price with a bit of a chuckle. |
|In some cases, you pay $0.35 per click on average, while your earning per click is over $1. |
Google says “Heey” … “Heeeeey” … “Heeeeeeeeey”…
This is Gold!
One thing, you did not answer smallcompany's question:
|Is there anything else in that email? |
| 12:36 pm on Apr 2, 2008 (gmt 0)|
I don't believe Google at all on any of this.
For example i've done the "bite the bullet ads" - you know, find a good keyword - that NO one bids on, bid on it only to find a 1.00 min CPC - pay that 1.00 min CPC to find out that that you're never going to get smart priced. I even had a 30% ctr on this keyword and a great conversion rate but i simply had to stop it because the CPCs never came down and it was becoming a loss leader. Had it been at its real minimum bid or slightly competitive it would have been highly successful. Conversion wise the difference is 10 to 1 in cost if they would have smart priced me down to even a 10 cent bid like other close yet less successful keywords they let run all day long
| 1:09 pm on Apr 2, 2008 (gmt 0)|
Just use Yahoo and Live.
Less work and less headache.
| 1:21 pm on Apr 2, 2008 (gmt 0)|
Thanks for the compliment ildarius. To answer your, and smallcompany's original, question. No, there was nothing else of substance in the email. It was not a form email sent to a group of people. It was a "heads-up" from my rep who I work very closely with and to whom I have made very clear that I do not like surprises.
Byron brings up a good point as well. There are other round-about ways google manipulates the market. One good example is keyword matching. In my case, our campaign has keyword "x," which drives a very significant proportion of our overall traffic and spend. If has a fairly bad ROI so we have added literally hundreds of "x" variations based on logic and log data. We also added "x" as both a broad and exact match.
Despite all this, we continue to get a huge number of clicks on the broad match version of "x" even though we feel we have almost every conceivable permutation of the term.
Shouldn't google matching algo find the "best match" for any given query? In other words, if someone searches for "ABXY" and we have "ABX" shouldn't the the algo say that "ABX" is a better match than simply "x?"
Of course, "X" has a HUGE cpc relative to "ABX," which gets few, if any, impressions. Which keyword do you think google is incented to serve?
Anyway, I am just saying this to support Byron's point that the black box of quality score does impact many other things as well, including minimum bids and the matching algo.
Thanks again to all for the ongoing thoughts.
| 2:03 pm on Apr 2, 2008 (gmt 0)|
All I want is SOME stability and logical working of the QS thing.. Rest I can live with.
| 2:26 pm on Apr 2, 2008 (gmt 0)|
No offense to the PPC guys out there, but have you guys considered doing SEO? It shouldn't replace your paid search strategy, but should be a part of your online marketing mix.
I know of many very large companies (quite a few Fortune 500s) are actually cutting back their PPC spend and investing more in SEO mainly due to the increased cost, diminishing ROI,and that click through rates have been relatively flat or declining for paid search.
| 4:14 pm on Apr 2, 2008 (gmt 0)|
|Only up 50%? Consider yourself lucky. While this post is great for reiteration purposes, Google has been pulling this "stuff" since their IPO. There are 2 Google's; pre-IPO and public Google. Yes they will probably continue to get even aggressive with their pricing policies, but as an advertiser who has fought Google for 5+ years all I can say is get used to it or get out. Google holds all the cards; venting is great, but will never change anything. I learned about 2 years ago to expect the worst from Google (when it comes to rising prices and 0 transparency), learn to do the same is all I can suggest. You have no idea how much better your physical and mental health will be :) |
+1. After GOOG became public they are a company that's first priority is to make shareholders happy. The only way to do that is to generate enough profit/rev to beat estimates every quarter. Very funny that people after years are finally realizing. "Hey......Maybe it's not just Google trying to increase quality of search results."
| 5:51 pm on Apr 2, 2008 (gmt 0)|
What really bugged me is how that website "#*$!xGoogle.com" was ordered to be taken down. It was just a website reporting insider trading activity and comments just like this discussion, but it was "too" dangerous to have people talking about this stuff and I heard was ordered to be shut down. People talk poorly about big companies all the time, what makes Google so special?
| 6:57 pm on Apr 2, 2008 (gmt 0)|
From our experience most all new products and enhanced features introduced in the past two years have reeked with greed and quality score was most certainly no exception.
CPC performance can’t be based on price--that will always change--but rather ROI and most importantly the opportunity to positively stimluate growth with a stable ROI--quality scoring has essentially chopped the head off of ROI.
We've scaled back our adwords spend from many hundreds of thousands of dollars per year to a measly amount and shifted budgets to Yahoo, et al.
Of all the enhancements introduced by Google--across their array of product lines--I can't name one that actually benefits/protects the cause of their clients but rather, little by little, as if to stay under the radar, nabs another small chuck of cash away and in the not so long-run makes a major profit difference for them…and you. While this behavior is no different that some other businesses the difference is that there's no additional value offered in exchange.
Really? Can you name a single, significant benefit offered to adwords advertisers to help their ROI without taking it away on another level?
| 7:58 pm on Apr 2, 2008 (gmt 0)|
Very good post and intresting enough I just looked over the last 3 years of spend with Google.
2005 was spending an average of 20k a month CPC .45
2006 was spending an average of 12k month cpc .66
2007 " " " " " 3k month cpc 1.00
2008 trying to drop it down even more
The spending frenzy for us or me is over I am now very selective on the keywords I chose, very selective on the times we are up and opt out of all content ppc ads.
We are doing fine, the ROI is way way way better than my hayday years.
If your not very careful your working for Google and all the money ya make is going to the buy traffic much of it just wasted on bad ads and or poor traffic.
Traffic is what we all want but make sure you have the smarts to let some of that traffic go. Learn to turn the ads off during periods most serious buyers arent awake and or home with their families and not surfing the net.
| 8:23 pm on Apr 2, 2008 (gmt 0)|
The best thing you can ever do is to opt out of the search network.
| 8:36 pm on Apr 2, 2008 (gmt 0)|
|there are really only 3 ways to grow revenue: |
1. Get more customers
2. Have your current customers come back more often
3. Charge your current customers more
I think that all 3 are possible.
1. Many SMEs are not online yet. Many are not using PPC as its time consuming. There is still a large growing market opportunity for new customers.
2. This is very true; especially in a self-serve marketplace. One of the most interesting questions Google has ever asked me is "With the barrier to entry and exit so low, how do we maintain customers?"
3. Charge more - this is the one which causes issue.
I'd like to add a few more:
4. Add more inventory. Many companies can't spend as much as they'd like on Google. The inventory could be mobile, search, contextual, behavioral, maps mashups, etc - just more ways to serve relevant ads.
5. Alternate revenue streams. The two most obvious are premium apps (which need a lot of cross integration with other Google products as well as a migration strategy from existing Google accounts) and the Google mini. Although there are small ones like Picassa premium.
6. Partnerships. The most obvious ones are where Google handles ad serving and search results on 3rd party sites. However, with the new ad serving platform, this could be expanded in other ways.
Got off the QS topic a bit; however, when you talk revenue and how a company will grow - you need to see where they are going as well.
Doesn't always help an advertiser facing raising CPC costs; but it shows a more robust picture of a media company.
| 8:56 pm on Apr 2, 2008 (gmt 0)|
|The best thing you can ever do is to opt out of the search network. |
I have to disagree. I really think it depends on the vertical, as I see some good traffic from Google's search network. It does, however, need to be monitored and some sites will need to be placed on the exclusion list.
I assume you've tried excluding sites that don't convert?
| 9:21 pm on Apr 2, 2008 (gmt 0)|
You can't exclude sites from the Search network. Content yes. Seach No. That is my number 1 problem, some I need traffic from some I don't if it works overall I keep search network on, if it doesn't I turn it off.
| 11:22 pm on Apr 2, 2008 (gmt 0)|
|The gist of the email I received was that Google is making an adjustment to their quality score measure. They don't expect that we will notice much difference except, perhaps, for a "slight increase in CPC." |
What bothers me about this (and I know we don't have the reps exact wording) is that Google states it is making an adjustment to the quality score measure. The rep apparently knows that this adjustment is going to have a negative impact. Is it a manual adjustment? Is it an algorithm adjustment? How does the rep know in advance that it is going to be negative? If this score is truly a quality score, why doesn't the rep then explain to you how to improve the quality of your site so as not to be impacted?
| 11:33 pm on Apr 2, 2008 (gmt 0)|
|Just use Yahoo and Live. Less work and less headache. |
Exactly! deploy your own quality score, look into your own algo and vote with your feet.
Adwords used to be a great platform to work with....too bad it turned to what it is now. An expensive exercise in wasting time.
[edited by: Web_speed at 11:34 pm (utc) on April 2, 2008]
| 12:09 am on Apr 3, 2008 (gmt 0)|
excellent read! Google has just evolved into a money hungry machine...with really no logic to be applied anywhere....our spend has also drastically dwindled down from enormous numbers to peanuts....much like 'yobaby' the very selective hand is at work when running on Google and doubt we will ever go back to a spending frenzy with the mighty G ever again!
| 1:32 am on Apr 3, 2008 (gmt 0)|
|What bothers me about this (and I know we don't have the reps exact wording) is that Google states it is making an adjustment to the quality score measure. The rep apparently knows that this adjustment is going to have a negative impact. Is it a manual adjustment? Is it an algorithm adjustment? How does the rep know in advance that it is going to be negative? If this score is truly a quality score, why doesn't the rep then explain to you how to improve the quality of your site so as not to be impacted? |
Google claims that QS is all done by algorithm and there is really nothing that they can do about it...but magically they know it's going to increase. Wow, they must be fortune-tellers.
So basically, as I've always said...Google is raising prices and fixing the market under the black box of quality score. But when you're working for the federal government, I guess you don't need to worry about the FTC.
| 6:47 am on Apr 3, 2008 (gmt 0)|
This is an interesting topic...
coincidentally, my employee and I was just reviewing our previous months profit and loss...
In 2 of our accounts this is what it looks like, we are not willing to increase our bids any more... as it won't be profitable--so a lot of our keywords got disabled due to min bid.. in both cases we are paying more per click the total cost is almost as much as before and we are getting fewer clicks... at some point we would have to shut down the accounts if they no longer are profitable... Date Impr Sum of Clicks Sum of Cost ctr ave cpc
3/1/2008--9003--481 $125.61 5.30% 0.26
3/2/2008--7888--438 $110.97 5.60% 0.25
3/3/2008--13554-962 $245.67 7.10% 0.26
3/4/2008--10063-746 $201.16 7.40% 0.27
3/5/2008--4206--422 $149.90 10.0% 0.36
3/6/2008--3731--448 $169.18 12.0% 0.38
3/7/2008--3549--426 $151.88 12.0% 0.36
3/8/2008--2712--323 $119.94 11.9% 0.37
3/9/2008--3064--275 $105.86 9.00% 0.38
3/10/2008-4660--536 $210.19 11.5% 0.39
Date Impressions Clicks Cost CTR Avg CPC
03/1/2008 4901 675 $202.32 13.74% $0.30
03/2/2008 4841 740 $232.58 15.30% $0.31
03/3/2008 6633 890 $275.78 13.42% $0.31
03/4/2008 4732 634 $218.03 13.36% $0.34
03/5/2008 2875 461 $186.10 16.05% $0.40
03/6/2008 3453 507 $201.30 14.71% $0.40
03/7/2008 3842 563 $225.16 14.68% $0.40
03/8/2008 3858 518 $207.27 13.46% $0.40
03/9/2008 3773 531 $212.25 14.04% $0.40
3/10/2008 3781 575 $242.75 15.19% $0.42
bold items denotes after google slap
btw.. I believe google will continue to increase prices, tweak it for the "quality score"--with a sarcastic tone... in my 3 years of experience when it comes to prices listening is not part of the strategy..:)
I guess if you see a storm in the horizon do you stand and wait for it to come? or do you make plans so that you won't get demolished when it comes?
| 2:34 pm on Apr 3, 2008 (gmt 0)|
1. What is the relationship between quality and price? What has quality to do with money?
2. Why has your $1 ad a bad quality, but if you pay for the same ad $10 the ad changes into good? The user who sees the ad don't see any difference, just the same ad, good or bad.
3. Will this logic be transferred to the search results, so that even the quality of your page is not good enough you can buy your listing if your are willing to pay the asked price?
4. Isn't this system not encouraging even more bad quality? Cause instead of fixing your page/ad/keywords, it makes you just raise your bid and you're done, fast and easy (only expensive, but many big companies seem not to care about it anyway).
[edited by: dBook at 2:42 pm (utc) on April 3, 2008]
| This 50 message thread spans 2 pages: 50 (  2 ) > > |