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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.
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.
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.