The beginning of the end of advertising?

The beginning of the end of advertising?

Once upon a time, Google sat in the middle. You had a question, and Google could help you find someone who knew the answer.

Google built an ecosystem around advertising. There were (and still are) other advertising networks, where you can dedicate a portion of your website to the highest bidder. Google's advertising network though is consistently considered as one of the biggest, and Google have worked hard to make it easy to implement, even for non-technical people.

But one strange side effect was that a perverse kind of relationship developed.

How Advertising With Google Works

As an advertiser, you can create a 'campaign'. A 'campaign' can be configured with hundreds and thousands of parameters, but there are a few important numbers to understand:

  • Budget
  • Click Through Rate

When you create your campaign, you set a budget, and Google will tell you roughly how many clicks they think you'll get. They've been doing this a long time, and they're pretty good at estimating this.

But this is where it gets complicated. Google automatically calculates the price per impression based on the click through rate.

As an example: I run a ballet school in Budapest, Hungary. I want to advertise to get more people to take lessons. I have a budget of $10. My $10 might buy me millions of 'low quality' adverts - shown to people in Los Angeles, or Addis Ababa, or who are browsing sites explaining detailed plumbing techniques. Or it might buy me just a few 'high quality' adverts - shown to viewers in Budapest looking at 'how to do a pliƩ', for example.

You'll also pay more for adverts you place on more popular websites. This makes sense if you think about newspaper advertising - is it cheaper to advertise in your local free paper, or in a big national newspaper?

How to get paid for adverts by Google

As the owner of a website, you can dedicate a portion of your website to Google, who will display adverts in that space for you. They will maximise your revenue by displaying the adverts that will earn you the most money. For example, if your website describes how to do a pliƩ in Hungarian, and there's an advertiser who wants to target people in Budapest who might want to take ballet lessons, then that advert will be a good revenue generator for you.

But what happens if no-one wants to advertise to those people? Then Google will display less and less relevant adverts, and you will make less and less revenue for each advert displayed.

Another factor in how much money you make per advert is how many visitors you get. If you have a very popular site, you make more money per advert, not just overall.

The problem

So, if you have a site which has relatively few page views, you're going to make less money from advertising overall and per advert. So to increase your revenue, you need to increase your traffic, which means... you need to advertise.

This bizarre relationship develops, where webmasters are both being paid by Google's advertising network for adverts displayed on their site, and then they're paying back in to take out adverts to improve their traffic and their revenue.

And at every step, Google creams off a percentage. In fact, they cream off 32-49% for the stats we know about (there are other products where Google don't disclose their cut).

So, everyone is happy, Google are raking in cash, advertisers are getting increased traffic, and content creators are getting paid. Right?

Wrong.

Google have just released passage level indexing in their improvements to search. Check out the picture below.

Google displaying new search results, with the answer to the question embedded in a Google search results page.

Can you see the problem yet? Google is no longer the middleman. They're no longer connecting you with your question to someone with the answer, they're answering it directly. The address bar shows google.com at the top.

Where previously, a user would have clicked through to wearshade.com, and potentially bought a weable UV sensor, now, they can find out for free. This is great for the user, but not so great for the owners of wearshade.com.

You might not feel sorry for the owners of wearshade.com. After all why shouldn't the user save themselves some cash? And I would tend to agree with you.

But what about doityourself.com?

This user doesn't need to visit doityourself.com any more. The owners and operators of doityourself.com can't advertise to this user any more. Revenue they previously got for hosting the forum, building the community, etc. will no longer be sent to them. Instead, Google can display adverts alongside content they did not create (or participate in the creation of), without sharing revenue with the original content creator.

Google are slitting the throat of the golden goose. And it doesn't make sense. They will discourage content creators from creating content. Unless they have plans to offer 'walled garden' content creation across all media streams.

The YouTube model

YouTube is now the primary source of user-created video online. Google host it, Google play ads in the middle of the content, and Google 'revenue share' with content creators. And this is the only way Google's move makes sense. Kill off independent publishing, and create a platform for everything. Google can monetise it however they like because they own the platform.

This is not the beginning of the end of advertising. It's not the beginning of anything. It's simply the next step towards consolidating the power of the media under the sphere of influence of a few, important people.

Ignorance is strength.