There's been a lot of buzz about the growing popularity of Microsoft's
However, Bing is still far, far away from seriously contending for Google's
The notion may seem preposterous at first, but ReadWriteWeb's Bernard Lunn has done a great job presenting the challenges facing Google's breakthrough AdWords advertising and AdSense ad-syndicating platforms.
Elephants don't forget … usually
In his article "AdSense: The (Weak) Elephant in the Room," Lunn takes a look at the stumbling blocks in Google's advertising business from the perspective of advertisers, third-party publishers that distribute Google's ads, and the consumers of the online marketing.
I'm not necessarily worried about the advertisers. As long as Google remains the 800-pound gorilla, sponsors aren't going to walk away. They may bid less on keywords if the campaigns are less effective, but that decision ultimately depends on the consumers.
AdSense publishers, who embed Google-provided code that populates their sites with relevant ads, are another concern. Lunn fears that click fraud and mysteries behind the payout formulas may hurt the program that plasters those "ads by Google" notices throughout cyberspace.
Again, these aren't deal-breakers. Click fraud and the unrevealed revenue-sharing percentages have been a part of AdSense since its launch six years ago. Beyond the current lull that has affected the entire online advertising industry, AdSense has been growing steadily and remains the top monetization tool for most content sites.
Google has always policed for click fraud, but it's also self-correcting. Since advertisers can track marketing campaigns, they simply bid less -- or avoid the AdSense network entirely and go exclusively through Google-owned sites -- to offset the cheaters. Yes, that makes it critical for Google to crack down on click fraud for the program to succeed, but there's little reason to believe that it's a bigger problem today than it has been since 2003.
As for the secret formulas behind how Google shares the wealth, it's not a mystery in sum. Google paid out $1.23 billion to AdSense publishers from the $1.64 billion it collected from AdSense advertisers during its latest quarter -- a generous 75% slice.
Sure, everyone isn't treated to exactly three quarters out of every buck in leads that they deliver to Google. Larger publishers make more. Smaller publishers make less. If Google's payouts were truly out of whack, smaller rivals such as the Yahoo!
They're not. This is still Google's game to lose.
Then we get to you
If advertisers and publishers could be happier but have nowhere else to go, what about you, me, and everyone else surfing through cyberspace? We're the third part of the powerful triumvirate that keeps Google ticking.
This is where Lunn's concerns do worry me. He boils everything down to three potential pitfalls.
- Ad blindness.
- Social-media alternatives.
- Declining relevance.
Ad blindness refers to Internet users who eventually filter out the barrage of ads that they are subjected to. Just as the click-through rates on graphical banner ads eroded after the novelty wore off, can the same happen to Google's contextual ads?
For now, this isn't a problem. Paid clicks through Google were 17% higher during this year's first quarter than they were a year ago. This may be a bigger problem for display-advertising specialists such as Yahoo!, Time Warner's
The social-media threat is legit. Social-networking sites such as Facebook and News Corp.'s
It also doesn't help that Google bet on the wrong horse, by rolling with a three-year deal with MySpace that's about to expire. Faster-growing Facebook is tethered to Microsoft, as it also sells its own ads. Twitter remains ad-free, for now. Either way, if Web users are relying less on search engines in general -- and Google ads in particular -- Google is going to be in trouble.
The third point -- declining relevance -- will come into play only if ad blindness and the booming popularity of social media deplete the demand (and ultimately, the supply) of Google's advertisements. That hasn't happened yet, but it's also not the leading indicator. When searchers start going elsewhere, that will be the first hint that Google has peaked.
That development would be devastating, for a giant that still lives and dies by the online advertising dollar.
So, no, Google isn't dying. It is looking pretty mortal, though.
Read up on Google:
Longtime Fool contributor Rick Munarriz still uses Google a lot in his daily life. He owns no shares in any of the companies in this story and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.
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