Will Website Ad Revenue and Search Engine Pay Per Click Rates Rise?

One of the cool things about the internet is how it gets us closer to a frictionless economy where there are fewer channel constraints or information uncertainties. Or at least that’s what I remember from Econ 101. As a businessperson, it’s kind of scary. But it’s what is. What’s brought me to thinking about this is the most recent communication I received from Google, the Ubiquitous (GtU), about their AdSense advertising program.

Google told me that on my websites where I show (and get paid for displaying) their ads, they were now adding an additional network of “Google-certified” advertisers. This network of third-party advertisers would compete with the Google advertisers for space on my website page. And Google would award this space based on this: “the ad generating the highest revenue for publishers will be displayed.”

Say what?
If you don’t use the Google Adsense or Google Adwords programs, I might as well be talking to you in Martian. If you own Google stock and don’t know what I’m talking about, you ought to research the revenue model of your asset. However, if we’re still connected here, chances are you are a Google AdSense or AdWords customer.  I live on both sides of this coin. I have websites that show ads and I also bid on keywords for advertising space on other websites. Here’s what I’m thinking:

Google AdSense
If you put ads on your website and get checks from Google, you might be able to smile. Google has just increased the client base competing for a presence on your potentially valuable website page. Although website page inventory increases everyday offering increasing options for your prospective advertisers, now there is a larger pool of advertisers looking for – and bidding on – that space.  Congratulations, looks like a win for you.

Google AdWords
If I’m bidding to have my ads placed on websites, it seems to me that I’ve got more competition. It was bad enough that I had to bid for keywords against those ignoramus who bring their egos to the table and bid outside of any meaningful ROI. But now, I’ve got both the ignoramus and the slick automated RoboAgency to compete against. Sort of like simultaneously playing chess against a computer and a 5 year old. I suspect my Pay per Click bid rates will increase.  Bummer.

Today, in a separate article, noted search marketer Kevin Lee wrote, Ten Reasons you’ll soon spend 25% more on search.” He makes some great points having a similar theme but barely touches on this matter of inventory expansion and bid competition.  It will be interesting to see how the factors he identifies together with the upcoming moves by Google to increase the set of advertisers ultimately influences revenue flowing to publishers (AdSense) and cost to advertisers (AdWords).