Ready, Fire, Aim! - Mihail's Public Blog: Google's keyword pricing bubble

Friday, February 11, 2005

Google's keyword pricing bubble

Heck yes, about time someone said something publicly about the crazy, keyword pricing bubble that seems to be helping Google (and Yahoo!) stock and revenue but is reducing conversion and ROI for most, if not all, of their customers. As I've been saying privately to friends and people in the industry, it is only a matter of time before Google's shine wears off since Google's success depends on its customers' success.

And if customers are starting to lose money on advertising on Google -- as one company I know experienced one heady month last year when its clickthrus went thru the roof but conversion rates dropped like a dead cat -- these customers are going to start to look elsewhere to meet their direct marketing and advertising needs. And the rapid revenue increase at Google is suddenly going to come slowing to a Hwy 101 crawl during rush hour. Hope you're shorting Google stock at the time! According to this Reuters story:

Bill Cobb, the president of North America at eBay Inc., said the company has seen "bubble-like" price increases for the key words that drive Web search advertising popularized by Google Inc. and Yahoo Inc.

"Pricing is a little wild right now. We have to focus on getting fair value," Cobb said at eBay's analyst meeting in San Jose, California. eBay (Research) is among the biggest buyers of Web search advertising key words.

Prices for key words used in Web search advertising have been on the rise as large and small advertisers move more of their marketing spending to the Internet, eBay executives said.

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