oftwominds-Charles Hugh Smith

Behind the Curtain I: Do Google Ads Actually Work?

To launch Behind the Curtain (a reference to the beloved film Wizard of Oz) I give voice to the greatest sacrilege in the investment and tech worlds: Google ads don't work anywhere as well as Google and the marketing mavens would have you believe.

(In retribution, my site will drop to obscurity in Google search results. Oh, I forgot, Big Brother Google never does anything evil.)

Exhibit One is this exchange in San Francisco Chronicle tech columnist David Einstein's May 21, 2007 Q&A:

READER: I have had Gmail for half a year, and I like it, but I am now a bit suspicious. I recently exchanged some messages with a friend from our Air Force days of 40 years ago, and I noticed that the list of "sponsored links" at the side all made reference to Air Force-related sites. Does Gmail scan message content to tailor that kind of advertising? If so, can I disable it?

A: You've had Gmail for half a year and you're just now noticing the ads alongside open messages? Guess they aren't working very well. (emphasis added--CHS)

Yes indeed, these little text ads are generated by scanning the message contents. Google, which owns Gmail, says, "The matching of ads to content is a completely automated process performed by computers. No humans read your e-mail to target the ads, and no e-mail content or other personally identifiable information is ever provided to advertisers."

If it's any consolation, e-mail services routinely scan the contents of messages to filter out junk mail and identify viruses. And no, you can't turn it off.

Exhibit Two: BusinessWeek recently revealed the truth in So Many Ads, So Few Clicks Can more targeted pitches reverse the shrinking response to online ads?

In June, Luke Mitchell's student marketing service, Reach Students, ran a series of Web ads to promote an offer from a major parcel delivery service. Only 0.04% of those people who got the ads on their screens bothered to click on them. He had expected at least 1% to respond.

The truth about online ads is that precious few people actually click on them. And the percentage of people who respond to common "banner ads," the ubiquitous interactive posters that run in fixed places on sites, is shrinking steadily. The so-called click-through rate for those ads on major Web destinations declined from 0.75% to 0.27% during 2006, according to Eyeblaster, a New York-based online ad serving and monitoring firm. It says that last March the average click rate on standard banner ads across the whole Web was 0.2%.

That's bad news for advertisers, who increasingly pay based on the number of banner ads served up, not the clicks they draw. Response is especially low on sites with Web-savvier audiences, such as social networking sites.

Of course, not everyone is happy with the move toward targeted ads. On Nov. 1, the Federal Trade Commission was to begin hearings related to consumer privacy and online advertising.

Marketers see increases of 30% to 300% in click rates when ads are customized based on criteria such as the location, content of Web pages visited, or information researched on search engines.

So in effect, your pathetic 0.04% click-through rate would jump 300% all the way to 0.12%--whoopie! You're up to spam-level returns! Or if you're getting a web-average .20% click-through, then a 30% gain for all those "context" AdSense Google ads would boost your response rate all the way up to .26%. Wow, isn't "context-sensitive advertising" just the greatest and most effective thing you've ever seen?

With response rates plummeting across the web, how much are you willing to bet that they're dropping just as fast on Google's "context-sensitive" ads?

Exhibit Three: context ads are laughably off-context and therefore a complete waste of money. One of my long-time friends writes a left-leaning political blog in Hawaii with a large mostly Hawaii-based readership. He has Google AdSense ads on his site. Earlier this year he wrote a brief squib mentioning Republicans, and for the rest of the week, Google's brilliant, amazingly accurate algorithms ran ads promoting a Republican Dating Service.

The advertiser got nothing. More recently, Google has Hawaii Travel Packages ads running on the site, even though the vast majority of the site's readers live in Hawaii and have zero need or interest in travel packages to Hawaii.

These are just two examples of the gross stupidity and uselessness of context-sensitive ads.

Exhibit Four: your ad appears just above your free search engine listing. I was recently looking for Intuit's free version of Quickbooks and so I did a Google search. Listing one was of course the official quickbooks.com website; just above it were the ads Intuit paid Google to run. What value did they get for their money? Zero! Their product page came up first via plain old free search.

So why are advertisers flocking to Google when the ads are painfully, obviously ineffective? The herd instinct. The marketing folks are terrified of being left behind or missing the web bandwagon, so everyone has a "web-based marketing campaign" which relies heavily on advertising which simply doesn't work.

One of my friends who operates a small vacation rental business states that Google and Overture/Yahoo ads do work for him. OK I grant that if you're running a site-specific business (a bed and breakfast, say, in OurTown USA) then perhaps a "sponsored search" or "context-sensitive" ad might bring results--especially if you only pay for click-throughs.

But let's say you have a wily web-savvy competitor who hires a click-fraud outfit to bang on all your links and ads. You get a bill for hundreds of dollars for which you received no actual customers. Don't think click fraud is real? Just do a web search on "click fraud" and see what comes up. (/irony)

I would also ask: where does your B&B in OurTown USA appear in search engine results? Maybe all you need to do is add a bit more content of value to potential visitors and a few more links (and incoming links from other area businesses) and perhaps your listing would come up on page one of any search without resorting to paid "sponsored search" ads.

And here's the truth behind the new spooky-sounding Google cellphone operating system, Android: it's sole reason to exist is to serve you ads on your phone. Oh, but this is really cool, folks, it's a web-browser on your phone. Hmm, don't phones already have web browsers? But this one will be open-source! Wow--and it will serve lots and lots of Google ads, too.

Resistance is futile, you will be absorbed by Googleplex. Not so fast. Hey, Google: when you run ads on every device and on every page, in every search and every YouTube video, you are evil in my worldview.

Maybe I am alone in this view, maybe not. Regardless of ethical considerations, eventually advertisers will wake up and realise web ads aren't working despite their high cost. And perhaps other users will tire of every device and every screen being plastered with useless, annoying ads they never respond to. Perhaps the public will begin restraining the reach of search engines' databases of users web histories. Maybe Google's happy-happy we-are-so-good public image will eventually suffer from ad-overkill.

My perspective would be different, of course, if I were a Google employee hoping to cash in and become a millionaire vis stock options; but I am a mere web user.

Is there an alternative? How about an honest transaction: for $20 a year, users get Google maps and all the other "free" bells and whistles--and no ads. No ads on searches, no ads on sites or blogs, no ads on YouTube videos, no ads on cellphones, no ads anywhere on any device. Or, you get it all "free" with ads everywhere, just like the present. Not offering the choice makes you evil, Google. Please stop claiming otherwise.


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