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Google Rebutts Study on Adverse Effect of Search Ad Deal

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Google Rebutts Study on Adverse Effect of Search Ad Deal

The Google Public Policy Blog wants to set things straight regarding a report by SearchIgnite saying that the Google-Yahoo search ad deal would catapult the prices on online ads by as high as 22% once the deal gets going in October. In their study, SearchIgnite claims that their clients feel more that the more competition there are in the industry, the better it is for the advertisers – the more vendors that these advertisers buy ad spots from, the more leverage they can have.

The said Google Blog post written by Google’s Chief Economist Val Harian, identified 5 problems with the SearchIgnite report.

  • ad prices are not set by Yahoo or Google but by advertisers themselves through the ad auction process, hence, there’s no way both Google and Yahoo can dictate the ad cost for advertisers
  • both Yahoo and Google won’t be able to see how much each of them are pricing their search ad spots and then decide which ads to serve
  • Yahoo will not serve as many Google ads for as many as its search queries but rather serve Google ads on search results where they have few relevant ads to serve. This actually makes sense since the more Google ads Yahoo serve rather than serving their own ads, the less revenue it will be for them.
  • On the issue of cost per click (CPCs), Google said that the report failed to recognize the more important measure of success for advertisers, which is return on investment of their advertising dollar. Based on their experience, advertisers are more than willing to pay more for high-valued clicks, meaning those which return more sales for their products. So CPC is not really a big issue.
  • And lastly, Google also rebutt the paper’s failure to take into account that Yahoo displays significantly more ads per page than Google. And this tends to reduce the average cost-per-click incurred by advertisers.

The blog post then reiterated the fact that Google doesn’t set prices for its ad placements, but rather the advertisers do. Ad prices must reflect how much ROI it would give advertisers which will be carried even after the Google and Yahoo ad deal has commenced.

There you go. Another issue closed. It’s still a couple of more weeks to go before the search ad deal is implemented. A lot of things may still happen and we’re expecting more opposition to this controversial advertising pact to come out as October sets in.

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Arnold Zafra

Arnold Zafra writes daily on the announcements by Google, Ask.com, Yahoo & MSN along with how these announcements effect web ... [Read full bio]

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