Google: Metrics Key To Keeping Web Ads Afloat In Recession, Not Clicks | Online Media Daily

FRESH OFF A WEEK OF doubts about the resilience of Google's paid and
natural search value proposition, one of the giant's top engineering
brass aimed to still the hearts of financial types feeling antsy over
declining ad clicks and a slumping economy.

"If an advertiser knows that they'll make five dollars by spending one
dollar, the chance is high that they'll spend it," said Alan Eustace,
senior vice president of engineering & research at Google. "We've
stressed measurability and providing a clear return on investment
since we started our advertising business--and the growth of paid
search shows that advertisers have bought into that. That's what will
help us in times like these."

Eustace addressed attendees at the Morgan Stanley Technology
Conference in Dana Point, Calif. on Monday, acknowledging that as a
relatively young company, Google hadn't experienced a true recession--
and that the market would have to, in a sense, "wait and see" what
future performance would look like.

But Eustace said that there were factors that made Google more
resilient than other ad providers in the industry. In addition to
attracting advertisers from across verticals, "our business is
geographically diversified across the world in fast-growing, medium
and stable markets," Eustace said.

As for the declining clicks--most recently reported by comScore, but
also by Google itself, during its fourth-quarter 2007 earnings
release--Eustace reiterated that the decrease stemmed from algorithmic
improvements on the ad-serving end, as well as the reduction of
clickable space for AdSense ads.

"It would have been easy for us to avoid making those kinds of
changes, or just increase the number of ads," Eustace said. "But we
made choices to reduce the number of advertisers and decrease
accidental clicks, because the changes deliver better information to
users and make them click more in the long run."

Eustace added that while clicks had decreased, advertiser conversion
rates were much higher--partly due to the giant's requirements that
many advertisers improve their ads' landing pages. "It's a shared
revenue stream between us and the advertisers, so they've been equally
motivated to improve the user experience," he added.

When it comes to organic search, Eustace said that the market is still
very competitive. "If a bigger, better alternative came out, people
would use it," he said. "So our engineers are not feeling fat, dumb
and happy because we feel like we don't have to work at search.
Competition could come from anywhere, and we work hard because we need
to meet user expectations."

//by Tameka Kee, Tuesday, Mar 4, 2008 7:45 AM ET
Tameka Kee can be reached at tameka@mediapost.com