In a rare sign of trouble for the booming search marketing business, Google is fending off complaints from angry customers who say recent changes to the company's advertising programme are costing them sales.
The search engine giant tweaked its AdWords service in late October, saying it was making the move to better identify successful ads -- those that get clicks -- and to increase their visibility. It also took steps to reduce the number of unsuccessful ads that show up on its search results pages. A company spokesman said overall ad response rates have improved since the changes took effect.
But the new system hasn't improved results for everyone, leading to a vocal outcry from those on the losing end. They say the new system pits smaller companies against bigger ones, ultimately favouring deep-pocketed advertisers that can afford to outbid rivals for coveted keywords. In addition, some say the changes may be responsible for hurting conversion rates -- the crucial sales that come after someone clicks on a Web advertisement.
"We would love to spend more with Google, but we're not going to overpay on [search] terms, when the surfer will click on terms and be frustrated and go elsewhere," said Daniel Mardorf, the Webmaster at Cellphonecarriers.com, who said he's seen response rates and sales from his Google ads drop since last month's changes took effect.
The dispute highlights Google's growing pains as it aims to extend its highly regarded search technology in new and more profitable ways. The company is reportedly preparing for an initial public offering early next year. The IPO is expected to value the company at more than $15bn, largely as a reflection of its earnings from its growing keyword advertising business.
Keyword advertising uses terms typed into search queries to help identify people who are likely to buy a given product or service. Advertisers bid for the terms that trigger their ads, but only pay when someone clicks on a link, an event that in many cases costs just pennies.
The ads have been a smash success so far, helping fuel a revival in online advertising after nearly three years of stagnation. Keyword searches made up 31 percent of the $1.66bn in US online ad sales for the second quarter of 2003, according to the Interactive Advertising Bureau (IAB), an industry trade group.
The complaints voiced by a handful of Google's advertisers don't mean that the bonanza is coming to an end. Some other advertisers said they are happy with the service and haven't noticed any significant drop in performance in recent weeks.
Still, the chorus of unhappy customers underscores an increase in pressure on search engine advertising programs. As keyword marketing grows in popularity, providers are likely to face a tough balancing act satisfying advertisers, who will bid up prices and fight for visibility on increasingly crowded lists.
Analysts said Google is using new automated tools to fight the growing complexity of its ad network, a strategy that could help keep its costs in check but that could expose it to other risks, as shown by the recent backlash.
James Lamberti, a vice president of media solutions at Comscore Networks, an Internet research firm, said Google is seeking to address shortcomings in its service without building up a large, well-trained staff of human editors to review ads -- the course taken by its main rival, Overture Services.
"Google is trying to accomplish through technology what Overture essentially does through an editorial staff -- they have a much more intense review process of what ads can appear against what words, whereas Google relies a lot more on technology," Lamberti said. "The financials are going to play into Google's favour, because they relying on the efficiency of the technology. It's yet to be seen whether it will work."
