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Challenges For Advertisers Hidden In Google’s Earnings Call

Google's earnings call Thursday brought a few hidden challenges for marketers to light.  There may not be problems for all; still, taking a closer look at  recent Google events discussed could shed light on how the Mountain View, Calif., giant will work to keep the lead in paid search and display advertising.

Some of you might remember late last year when Google began looking through its ad network to determine those who were tapping into AdWords and other ad tools to spam consumers. Company executives shed some light on the move in Thursday's earnings call.

Google, of course, declined to confirm the number of accounts affected, but did say the process began in October and ran through December. A Google spokesperson said a "small number of scammy advertisers" were deleted. Expect the change in process to continue.

During the question and answer session after the earnings call Thursday, Google execs told analysts this "ongoing" process "permanently" eliminates advertisers that spam consumers. In the past Google disabled "bad ads," but this time it banned those who repeatedly posted scams from the network. The permanent ban could present problems for some, especially those who feel unjustly treated.

The purge, known as the Google Ban, might signal an "ongoing" process, but AdGooroo put that number at about 30,000. Rich Stokes, AdGooroo chief executive officer and founder, estimates the purge at approximately 5.3% of active advertisers. Stokes argues that Google actually experienced increased competition for ad placement, resulting in higher ad prices, and unusually high click-through rates.

Google execs mentioned making some improvements on the content network that some advertisers might not have noticed. It reduced the total clicks in the network. The higher proportion of clicks coming from and AdSense in search created a shift in the mix that caused the aggregate cost per click (CPC) to rise.

Google reported that aggregate paid clicks -- including clicks related to ads served on Google sites and the sites of AdSense partners -- increased 13%, compared with the same quarter in the prior year. Revenue from the average CPC ad, which includes clicks related to ads served on Google sites and the sites of its AdSense partners, rose 5% compared with the year-ago quarter.

In 2010, Google will also heighten its focus on display advertising. For most, the process will become easy to switch from traditional to digital, as the company continues to replicate the offline buying process for online sales through tools like Google Content Network, Ad Exchange and Doubleclick platforms. The less than tech-savvy might find the switch daunting.

There are millions of Web sites where advertisers can buy ad space. But Google aims to create the perfect display ad network. Nikesh Arora, president of Google's global sales operations and business development, agreed with Patrick Pichette, Google chief financial officer, that "simplistic" tools for advertisers and publishers continue to contribute to the rise in display. The shift from buying sites to audiences when considering where to place ads will also pull more advertisers into online display ads.

And, marketers who have not integrated offline and online campaigns will run into roadblocks this year. Retailers tell Google they have begun to see a surge in online searches impacting offline sales -- and vice-versa. About 78% of people research something online before making a purchase.

by Laurie Sullivan


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