• Pat Grady

    Are those clicks values just for desktop/laptop search?  Mobile doesn’t convert as well, so we advertisers bid less.  But the traffic is additive to G – it’s not click cost erosion, it’s the addition of many more clicks that happen to have a lower click value, bringing the average down.  Display is also growing rapidly thanks to many improvements G has made, same dealio.  They’re growing G Shopping clicks as we speak, those will have a very high click value (shopping, winning, duh!).  Many advertisers are doing a better job of long-tail advertising (including using G’s Dynamic Search Ads), also lower click value volume to G, but additive.  There are other reasons why the click value has changed.  Anytime G reaches well into a new area, the lack of competition among advertisers in the auctions, and the lack of monetization expertise, will most often mean their click growth entry points are at a discounted click value, but eventually, value oozes out, and CPC’s rise to their matured balance.  MBAs would tell us this entry cost is common to businesses growing by tapping into new markets – economically free cash flow is more important than click cost, and strategically market share reigns supreme in expansion areas (the early bird).

  • http://www.rimmkaufman.com/ George Michie

    Interesting piece, Andy, but ultimately I agree with Pat.  Google doesn’t care about monetizing clicks, they care about monetizing impressions.  Serving SERPs is expensive and it is maximizing the revenue on those page views that continues to increase despite CPC declines.  More folks who get to a SERP click on an ad than used to be the case.

    With respect to their own marketing efforts and ultimately their monetization efforts, they face the same law of diminishing returns that the rest of the world does.  As you pointed out search is a maturing space, and while mobile continues to grow the pace of growth has already slowed in the US with the exception of tablets, and tablet traffic is more likely to cannibalize home laptop traffic than smartphones do.

    The Google tree won’t grow to touch the sun.  That said, the decline in growth rates leaves them at a pretty enviable 20% YOY growth, which is not too shabby compared to most businesses.  Last, Google’s ability to generate profit is still pretty astounding.  They could very easily pull back on marketing/sales activities and pull out of some of their less profitable ventures.  They make so much money off of a pretty lean crew (search quality + adwords) that they can post whatever profit number they need to in any given quarter.

  • http://profile.yahoo.com/PYFVPA52PTVVBLT6NKNRZ4LYKE steppppoS

    Who says GOOG is valued less than AAPL? AAPL’s PE is only 13.55 while GOOG enjoys a PE of 18.
    AAPL’s price has appreciated much more over the last year but they were starting from a much lower valuation than GOOG.