26/10/2010

By Steve Baker, Chief PPC Analyst, Epiphany Solutions Ltd

The relationship between Google, its paid search advertisers and its users is an interesting one. It can be argued that the power in relationship is determined by which party or parties need the other(s) the most.

So who has the power, is it the paid search advertisers, who pay Google’s bills, is it the millions of people that use Google every day, or is it Google themselves?

Google Need PPC Adverts

In 2008, 97% of Google’s revenue came from paid search advertising. Without it, Sergey and Larry would have to move back out of the Googleplex, and back into their (admittedly, probably quite large) garage.

Paid Search is their only real source of income, and yet the advertisers don’t always feel as though Google loves them.

PPC Advertisers Need Google

Well — in most countries they do, anyway. Depending on where you live, Google can command up to 90% (or even more) of the search market.

If an advertiser wants to do paid search, they need Google. Do Google really take advantage of this? The cost per click on Google doesn’t seem to be unreasonable — in fact we’ve got a number of accounts where Google is cheaper than the other search engines.

Google also seem to be quite keen to support paid search advertisers (at least, they do if you spend a lot of money, or you’re an agency). I know that if I have a problem or a question, I can phone or e-mail one of our friends at Google, and they’ll be able to help, or pass me on to somebody else that can.

Google Need Users

But if PPC Advertisers need Google because it’s got most of the market, then clearly, Google have to place the needs of the users ahead of their advertisers. Pandering to the needs of the advertisers at the cost of market share would, in the long term, be very damaging to Google.

So it seems that Google are having to perform a balancing act — they want to make as much money as possible from their advertisers, but at the same time, they want to keep their market share in terms of users.

Google Wants More Money

This is an interesting one. I’ve said that Google wants more money, not that they need more money. The amount of money that Google gets is based on the number of people using it (more clicks = more money) and the amount that advertisers are willing to spend on it.

Perhaps then, this is why Google is so keen to improve the advertiser’s experience. Speaking as Chief Analyst at an agency, I’m going to be willing to pay more for a click if that click is worth more. The best way for me to increase the value of a click is by understanding better which clicks work and which don’t. Knowing that some search queries have a higher conversion rate than others, or that some areas of the country work better than others (and being able to target accordingly) means that I can bid more when and where I get the best results.

On an aside, why don’t Google allow you to see hourly conversions? This would allow advertisers to push their spend into the most profitable times of day, and I believe it would probably increase click spend. This seems like a short-sighted decision on Google’s part (unless it’s for technical reasons). Whilst it would reduce the average cpc when the clicks are worth less, it would also increase them when the traffic is of the highest quality.

If I have a criticism of Google’s approach, it seems that they do seem very keen (too keen) to get their advertisers to spend more. Recommended bid adjustments seem to be up more often than down, and many of their ‘advertiser tools’ seem to be designed to generate more money for Google, not the advertisers.

On the other hand, Google are doing some things for their paid search advertisers, that perhaps aren’t appreciated as much as they might be.

Consider Google’s instant results for example. Whilst some paid search advertisers think this is a bad thing, look at the search results with and without it. With the instant results, there are more paid search adverts above the fold, and fewer natural search results. Whilst my colleagues in the SEO team here at Epiphany may view this as a bad thing, from a PPC perspective, it’s certainly not hurting us!

After all, something that Google and their advertisers both want is more users clicking on paid search results. Whilst Google mitigate this by their need to retain and even improve the integrity of their search results, certainly Google and the advertisers should be on the same team…

Users Need Google. Um — No, Not Really

Why do people use Google? Why is their market share so large? Is it because their search results are much better than their competitors?

The truth is that they aren’t really. There are plenty of tools out there to compare the search results, and a number of studies have concluded that Google’s search results aren’t any more relevant or useful than those of Bing or Yahoo.

So why do people use Google? Perhaps it’s simply a force of habit. I always use Google because I’m used to it. I know what the search results are going to look like, and it works as well as anything else.

To ‘Google’ is synonymous with to search. It’s a part of everyday language.

But so is to ‘Hoover’ and I use a Dyson. It certainly helps to have a well-known name, but it’s not enough by itself.

The truth is that it probably wouldn’t take a very large push to make a lot of Google users switch to another search engine. They just need a good reason to. Look at what happened when MSN became Bing — everyone tried it out to see whether it was any better. As far as I could see, the results were about the same, so I went back to Google — along with most other people, I think.

So Google’s market position isn’t as solid as it seems — they only get advertisers because they have market share. They only get users because they haven’t got a good reason to switch search engine.

At the moment, it seems that the users have the power — Google and the advertisers need them far more than they need Google. The advertisers will always follow the users, so without them, Google has nothing.

I don’t think Google’s in any danger of losing its market share any time soon, but putting my soothsayers hat on for a moment, I think it’s just a matter of time before somebody invents a better search engine, whether it’s better results, a better layout, or it simply becomes more fashionable. Ten years from now, Google won’t be the force that it is now. Until then, perhaps the only way that they can keep everyone happy is to keep the users happy, and ignore the advertisers.

Find out more about Epiphany Solutions Ltd at www.epiphanysolutions.co.uk