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Is there a wave of CPC AdWords Competition after Algo Tweaks?

A Question for AdWords Advertisers

   
7:11 am on Mar 1, 2012 (gmt 0)

WebmasterWorld Administrator martinibuster is a WebmasterWorld Top Contributor of All Time 10+ Year Member Top Contributors Of The Month



In another thread [webmasterworld.com] the OP posted this:

Google essentially lowers the amount of available inventory for ads by demoting publishers. Therefore raising the CPC amounts that advertisers pay, creating a win, win scenario.


It would be interesting to know if each algo tweak is followed by a wave of new advertisers. I have no idea one way or the other, but wanted to know from the AdWords crowd if you notice an uptick in costs/competition after each Google Search Algo Update.

From Google's 3rd Quarter 2011 financial report [investor.google.com]:

Q3 Financial Highlights

Revenues – Google reported revenues of $9.72 billion in the third quarter of 2011, representing a 33% increase over third quarter 2010 revenues of $7.29 billion. Google reports its revenues, consistent with GAAP, on a gross basis without deducting TAC.

Google Sites Revenues - Google-owned sites generated revenues of $6.74 billion, or 69% of total revenues, in the third quarter of 2011. This represents a 39% increase over third quarter 2010 revenues of $4.83 billion.

Google Network Revenues - Google’s partner sites generated revenues, through AdSense programs, of $2.60 billion, or 27% of total revenues, in the third quarter of 2011. This represents a 18% increase from third quarter 2010 network revenues of $2.20 billion.
1:50 pm on Mar 1, 2012 (gmt 0)

5+ Year Member



I've responded to that other thread and touching briefly on the part you quote here. Basically, the OP in my opinion is out in left field. It's not understanding how Adwords works in my opinion. For some reason, lots of people think that it's Google setting the prices. In fact, they have nothing to do with it, it's all the advertisers.

Now, I don't see how changes in the algo would increase the number of advertisers. These two concepts are not related at how.

As I manage a dozen or so client accounts, I can tell you that in general, the costs are going down. It's because of my management efforts, not because there's more or less competitors or there was an update to Panda which I don't pay any attention to. I can say the same for Bing as a few of them advertise there as well and costs are down there too. Their costs are going down because of doing things better.
3:45 pm on Mar 1, 2012 (gmt 0)

WebmasterWorld Senior Member netmeg is a WebmasterWorld Top Contributor of All Time 10+ Year Member Top Contributors Of The Month



Changes in the algo could increase the number of advertisers because not everyone can afford to wait around to see if their SEO tinkering will bring the traffic back. In the short term, they may turn to AdWords.

In fact, I'm reasonably sure that some of my clients competitors have done this for that very reason. I keep pretty close track of competitors and other industry websites (I am responsible for organic AND paid traffic for my clients), and it's pretty easy to see when one of them gets dinged by a Panda or a penalty.

And I do see some crazy minimum projected first page bids by Google, even on QS10 keywords. I don't usually end up *paying* that amount, but it's what they report.

So I think there's kind of an indirect relationship going on here.

That said, I've never actually tried to hook up increased competition to an algo change date. Maybe next time I will.
6:12 pm on Mar 1, 2012 (gmt 0)

5+ Year Member



I could see where a certain percentage of people would turn to PPC if natural rankings fall. But I think that would be a very small percentage. Most SEO people I know want nothing to do with PPC, mostly having to do with "SEO is free, why pay for traffic". Admittedly, I believe most of those are affiliate marketers and this could be different for people with real businesses who view PPC more as a complement to SEO, but especially if they never could rank high organically.

The thing is, Google gets new advertisers all the time for all kinds of businesses. I don't think manipulating the organics to try to get more Adwords users would add a significantly large percentage to those numbers.

Crazy messages such as below first page bids when you're already on the first page are fairly common. It's just a matter of understanding the big picture of what's happening, the system's point of view. They are annoying, especially to clients who often ask why.
7:02 pm on Mar 1, 2012 (gmt 0)

WebmasterWorld Senior Member netmeg is a WebmasterWorld Top Contributor of All Time 10+ Year Member Top Contributors Of The Month



Most SEO people I know want nothing to do with PPC, mostly having to do with "SEO is free, why pay for traffic".


Most of the circles I run around in do both, so there ya go.
7:09 pm on Mar 1, 2012 (gmt 0)

WebmasterWorld Administrator martinibuster is a WebmasterWorld Top Contributor of All Time 10+ Year Member Top Contributors Of The Month



Yeah I saw that too and shook my head. The idea that organic SEO is somehow cheaper or more cost effective than PPC is missing the point. Ranking in organic is definitely not free, everything has a cost.

There are a million reasons why someone would want to pay for traffic and conversions is one of them. Creating mindshare is another. Building links is another, etc. etc. etc.

I didn't want to respond to that post because it's off topic but there you go. Lucid, ya' learned a lesson for today. Please keep on topic with your next post.
10:29 pm on Mar 1, 2012 (gmt 0)



Here take a look at this, food for thought. Each Panda update potentially causes an abrupt shift in the supply of ad sellers to the left (few sellers, ad publishers). Ad demand by adwords stays constant during panda updates. Here is a graph. (note please include the image just a direct link)

[i40.tinypic.com...]
11:04 pm on Mar 1, 2012 (gmt 0)



So, Panda is increasing the quality of web results with adsense involved (most of the time), correct? Thereby weeding out what they consider lower quality publishers (very subjective with this kind of profit motive, my original point), they increase the subjective "quality" of web results, lowering supply of available ads (supply in the sense what users interact with showing a website on the first page versus the fifth). Publisher's get caught in the crossfire. Google's profit goes up. (Edit) Sorry, I almost Forgot! Increasing the cost for you advertisers.
12:08 am on Mar 2, 2012 (gmt 0)




I want to make one more assumption. The supply curve represents all available ad inventory (not single sites). This is why you see certain pages being affected by Panda while others are not in some circumstances. So for example, a single site owner has their ad inventory reduced by 50% during a panda update (these pages are pushed way back in the results) Ad inventory is therefore reduced as an aggregate by Panda.

Again, Panda has quality associated with it, but again I argue it has less importance than what most webmasters place on it.
10:33 pm on Mar 2, 2012 (gmt 0)



Here is a new graph with the help of some collaboration (looking for more help from economists, computer scientists, mathematicians please apply). You can see the whole thing here [i41.tinypic.com...] . Here is a wiki where anyone with an idea can post freely [panda1.wikidot.com...] . Obviously, the economics of Google's system are very complex so some assumptions had to be made. I won't post anymore about this here. I realize it is clogging up the forums. It's just something I think people should be thinking about.
8:56 pm on Mar 4, 2012 (gmt 0)

WebmasterWorld Senior Member 5+ Year Member



it seems that you assume a linear relationship between supply and demand. if so, i disagree with the premise of whatever argument you're making. :-)
10:16 pm on Mar 5, 2012 (gmt 0)



Thanks for the reply Rhino. While, "Correlation Does Not Imply Causation", hehe. Most people would agree that something is going on inside the Panda Pony. I challenge you to make one that works. The floor's open.
8:02 am on Mar 7, 2012 (gmt 0)

WebmasterWorld Senior Member 5+ Year Member



In fact, they have nothing to do with it, it's all the advertisers.


It's Google based on the data it has, and its financial needs.

"All the advertisers" was with old Overture system.
2:20 pm on Mar 7, 2012 (gmt 0)

5+ Year Member



Who decides on what bid to place? Not Google, the advertiser. The whole system self maintains really. Google doesn't say "we need to make more money, let's jack up the price". Doesn't happen because everything is driven by the advertisers. That's why the QS system exists and in fact, makes more money for Google when there are more quality ads.
3:07 am on Mar 15, 2012 (gmt 0)



thanks for your help.
10:41 pm on Mar 15, 2012 (gmt 0)

5+ Year Member



It would be interesting to know if each algo tweak is followed by a wave of new advertisers. I have no idea one way or the other, but wanted to know from the AdWords crowd if you notice an uptick in costs/competition after each Google Search Algo Update.


I've not seen an increase in costs per se, but rather a decrease in traffic from lower converting sites. So, if an advertiser is looking purely for clicks, their costs may be going up. If an advertiser is looking for conversions I imagine that their cost per conversion might remain the same -- as mine has.
 

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