Chuck: I have problems with this analysis. I just don't see it. Currently.
In the year following that article Google aggressively dealt with the results of that quarter. Ad clicks jumped 26% in the latest quarter in 2013 and cost per click dropped a little.
Overall revenues from ads soared. Profits jumped. But analyzing google profits from revenues is a different story. Google can spend tons of money on things that don't bring in revenues...and add to costs. Or they can cut back on those other activities. Its up to them. meanwhile their ad machine is working like a charm. For them.
They don't break down data in ways that I believe would add to more insightful analysis or in a way that substantiates the comments you make. Nobody knows what they make from small businesses. I've scanned. I can't find it. There might be estimates...but I'd like to see them.
The process of adding ppc accts costs them squat. Its all done to scale and primarily done automatically with very little human time spent on it, if at all. Once a campaign goes up it makes them money. Its profitable. If google wanted to really be profitable for a year they could fire two of every 3 people that don't work in an ad revenue basis and that would cut their personal and overall costs by a ton. Then their profits would be out of sight.
Of course I suspect that would create a serious quality issue...and then they just might pay for it in lost traffic as people went to other search engines. But that is another story and merely an hypothesis.
I looked at one of our ad campaigns for one of our smbs. Its been running adwords since 2005. (google started adwords in 2000 per their own blog). I checked it on an annual basis from mid year to mid year since we started that campaign. Its the campaign with the most impressions, clicks, and highest volume of annual transactions.
It appears that campaign more or less "normalized" in 2007/2008. Since then its volume of clicks has been sort of steady. Its a regional campaign.
Some interesting data with regard to this campaign and what we have experienced with others. I think it is somewhat reflective of they ways in which google has been able to expand the volume of clicks across the board.
In 2007/2008 the campaign received a little more than 100,000 impressions. It had a CTR of about 10%. In the last 12 month period from mid 12 to mid 13 the campaign had about 400,000 impressions. Google reported detailed info on about 125,000 impressions...and didn't tell us squat about the 275,000 impressions wherein it showed the ads...but where it roughly didn't get clicks. On the other 125,000 impressions there was a little less than a 10% CTR. On the 275,000 impressions where they don't tell us what they are doing it had about a 0.2% CTR. I could go back through details...but its too time consuming.
Frankly not a lot of extra impressions on the core keywords that we focused upon about 5 years ago after a lot of experimentation from the earlier years.
But google is showing our ads at a tremendous rate in places where its obviously not too relevant. And in those places for those keyword searches...it is generating some volume of clicks. We are paying. They are making $$$$.
While I don't know all those places for which our ads are showing and what the terms are...I do look at the volume of ads for phrases that are critical to this smb and most germane to searchers. Our good old conversion phrases.
Simply the ad column is filled to the max of 10. Most of the companies in the ad columns are not on target for our critical keyword phrases. Just as our ads are being shown in places where its not germane....these other businesses are being shown in "our ads".
In both cases it pushes up average cost per clicks on those whose ads sit highly. There is more competition for the keywords. The businesses that bid aggressively push up the bid prices. The result for us is that after 5 years with roughly the same amount of impressions and clicks...we are paying about twice as much as five years ago.
Meanwhile I'm sure in those 275,000 impressions wherein google doesn't tell us anything...our ads showing and scarcely ever being clicked on...contribute to pushing up the bid prices on ads that do get hit.
We've seen the same circumstances for every one of our smbs. Regardless of the aggregate cost per click data that google reports...google is aggressively and consistently increasing the volume of advertisers and the volumes of clicks on their ads. I do believe average revenue per click is a false metric that google has pushed out to the financial community....to mask what is really going on.
Of course our situation is a microcosm of what is occurring across the board.
I can't see how somebody can say that google is losing money on smb's. Where does the data come from?
Selling into the smb world is so so tough. I did it. You did it. One customer at a time. Their time is precious. They really don't want to speak to you. Its a rough experience. Google has a difficult time doing this but so does every entity selling into small businesses. meanwhile from my observations they keep chipping away at it.
Over the years I keep looking at different verticals in my region. One thing I've seen is more ads for more smbs and with it ads for the products or services sold on the web or through major businesses. There are more google ppc ads floating around. Its not just that I see ads in verticals where I didn't before; I see 6,7..up to 10 advertisers.
Google is getting more businesses to advertise...and its getting more to compete for each phrase...thus pushing up prices.
Is it possible that average price per click is falling because an infinitely greater number of businesses are advertising...and they start out with lower costs??? That could be.
Frankly all our sites with mobile get plenty of clicks on ads from mobile search. I have yet to see a definitive argument that apps are crushing search or vice versa. Where is the data?
One interesting example wherein an app could seriously dent google ad revenues for smb's would be with apple maps. When they came out a year ago they were a disaster as a presentation. (OMG...that makes me think about the US govt site for ObamaCare!!! ). Ha ha.
What did and what is occurring. The Apple Maps app was seriously panned. Apple allowed google maps to reappear as an apple App. Meanwhile Apple spent a lot and is working a lot to improve the accuracy of its web mapping info and algo's. (If its efforts are like that of google's it could take a couple of years to get it up to snuff and similarly accurate with google maps now). With the money they have and the efforts they are making I'm sure they'll get there sooner or later.
Maps are a great app for pulling searchers away from local search. Mapquest, yelp, various alternative mapping apps, etc...and apple maps can seriously dig into the volume of local searches done on mobile and impact potential ad revenues in this manner.
Is it occurring? Nobody seems to have data on this. If its there please present it. I'm eager to see it. I do know that the volume of apple mobiles is so large that it alone would cut into local searches by google.com. That could alone be sizable. For the smb whose adwords data I referenced above, in the last 12 months 60% of its mobile traffic came in from apple devices. That is a lot. If apple's share of mobile is 30, 40, 50, 60% that alone is large enough to put a dent into google search...especially if the alternatives on apple phones are agressively pushed and effective.
Frankly I believe that Apple is the large threat to google's influence on mobile. If they maintain their large share of the mobile market and establish alternatives to google search, especially for local smbs and businesses that would impact google's ability to get ad revenues from smbs and from large businesses competing for the local dollar.
As an operator of smbs if Apple had ad products and the kind of visibility on its own apps, and the market share of mobile it delivers...we would be seriously pressed to move money there. If that cut into our google spend...so be it.
Now I hate the monopoly that is google. H.A.T.E I.T. The straw that broke the camels back in my case was when one of our smb's purchased a competitor, Strangely, it inherited a penalty from LOCAL GOOGLE. That should not have occurred. The old smb had a penalty. It's local account was closed. We kept the address and we kept the phone number. We set up a new Google Local Account. It inherited this penalty that wasn't completely obvious.
When we addressed it...it didn't get fixed. That was where I went nuts. With google you are in a black hole. They don't have to do anything. They let this business die on the vine. I/we had no recourse. Google simply controlled this smb's fate. How f*cked is that? Who annointed google the most important and powerful force in economics??? We were lucky to get this issue fixed. Our businesses have faced other obstacles including competitors, market conditions, are own internal issue, and state governments. None of them were as daunting or powerful, or created scenarios without recourse as did google.
I got it fixed...but that was luck and a result of my own long efforts inside google. Most smb's don't have that resource. And I was lucky...and I know it.
I just don't think the scenario written about in that newspaper is on target. I think its way off target. I don't see the US govt taking a shot at google. I don't see search users (google's real audience) being turned off by google, even remotely.
I don't see US politicians going after them at all. IMHO nobody in Congress is a real supporter of small business, certainly no party really supports small business in a substantial way. And frankly google, like many large businesses is greasing the politicians hands with contributions. And google is spreading that $$$ to the different political stances. I don't see Congress raising its ires at Google.
IMHO hopefully large businesses get fed up with google and push to get the govt to f*ck with them. That periodically occurs. Recently the financial businesses and the retailers fought about CC fees. The retailers won that round. In telecom phone companies fight with internet providers.
Let all business be willing to go after google. That would be fun, IMHO.