Monday, February 20, 2006
Guardian Unlimited | Special reports | 'Click war' as Google rivals get serious:
"...An article in the financial magazine Barron's has warned that Google's stratospheric market capitalisation could be abruptly halved should its model of business receive any comparatively mild knocks. One scenario is a decline in the market for key-word advertising. The price advertisers pay to Google when users click on their links after a key-word or phrase search depends on market forces - for instance, the number of similar services prepared to pay for Google to direct search traffic their way. But there are complaints that Google searches cost advertisers too much.
Online advertising revenue last year grew by 34 per cent, to about $13bn, compared with just 4 per cent linked to TV, radio and print ads. How long that will last is uncertain. Firms including eBay and Travelocity talk of 'unsustainable levels of spending' on search advertising; Barron's says a phrase such as 'charity car donation' now costs the advertiser $35 when their site is visited. The phrase 'home equity loan online' will cost $27.89.
Clearly, with billions of ad revenue dollars sloshing around the search engine business, Google's big rivals will be willing to pay for a market share. But advertisers must believe online ads are value for money. The 'pay per click and search' model does not guarantee a sale after all, and the system can be easy to abuse with software trained to click on ads repeatedly. In other instances 'click farms' have been contracted to drive up the cost of their competitors' advertising. By some estimates, up to 25 per cent of all clicks are fraudulent.
With Google and Yahoo! executives under oath before Congress over concessions granted to the Chinese government in exchange for access to that country's market, the news that the online search party may soon be spoiled by gatecrashers has yet to sink in. Google has lost more than $100 per share off its peak valuation over the past month, but it still has some $230 to go before it reaches the level considered reasonable by that well-known net bubble sage, Henry Blodgett - who last week said $100 was right."
"...An article in the financial magazine Barron's has warned that Google's stratospheric market capitalisation could be abruptly halved should its model of business receive any comparatively mild knocks. One scenario is a decline in the market for key-word advertising. The price advertisers pay to Google when users click on their links after a key-word or phrase search depends on market forces - for instance, the number of similar services prepared to pay for Google to direct search traffic their way. But there are complaints that Google searches cost advertisers too much.
Online advertising revenue last year grew by 34 per cent, to about $13bn, compared with just 4 per cent linked to TV, radio and print ads. How long that will last is uncertain. Firms including eBay and Travelocity talk of 'unsustainable levels of spending' on search advertising; Barron's says a phrase such as 'charity car donation' now costs the advertiser $35 when their site is visited. The phrase 'home equity loan online' will cost $27.89.
Clearly, with billions of ad revenue dollars sloshing around the search engine business, Google's big rivals will be willing to pay for a market share. But advertisers must believe online ads are value for money. The 'pay per click and search' model does not guarantee a sale after all, and the system can be easy to abuse with software trained to click on ads repeatedly. In other instances 'click farms' have been contracted to drive up the cost of their competitors' advertising. By some estimates, up to 25 per cent of all clicks are fraudulent.
With Google and Yahoo! executives under oath before Congress over concessions granted to the Chinese government in exchange for access to that country's market, the news that the online search party may soon be spoiled by gatecrashers has yet to sink in. Google has lost more than $100 per share off its peak valuation over the past month, but it still has some $230 to go before it reaches the level considered reasonable by that well-known net bubble sage, Henry Blodgett - who last week said $100 was right."
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