Google Finds Big ROI Jump for Content Ads

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CHICAGO -- Advertisers participating in Google's contextual advertising network have seen a 50 percent increase in their return on investment in the past year, the company said yesterday.

The Mountain View, CA, search giant conducted a study with Atlas DMT that examined conversion data culled from Google's free conversion tool for advertisers and those using Atlas to track conversions.

Google said the research showed a 50 percent jump in ROI in 2004, based on cost per conversion, compared with 2003. The average amount of money spent by those clicking on content ads has risen 70 percent in that period, the company said.

Google representatives attributed the improved performance to the introduction in April of Smart Pricing, a Google technology that discounts the price per click for many content listings, and a drive by Google to improve ad targeting and quality for content listings.

"We're obviously always trying to get the most valuable rate of return for our advertisers," said Patrick Keane, head of sales strategy at Google. "When we launched the program, there were some questions about performance. We've improved a lot in the last year."

Google introduced Smart Pricing in response to complaints from many advertisers that clicks on content listings converted at a much lower rate than search clicks. Unlike rival Overture Services, Google does not offer separate auctions for its search and content listings.

Instead, Smart Pricing adjusts the price of clicks based on how well Google determines a listing performs in different ad inventory.

At the Search Engine Strategies trade show in Chicago, search marketers offered tepid support of the move.

"It was an improvement over the old dumb pricing," said Andrew Goodman, principal of Page Zero Media, a Toronto-based search marketing firm.

Goodman urged Google to give marketers more control over their advertising, including the ability to bid separately, use different creative and block publishers sending traffic that is not converting.

"There's no transparency to the program," he said.

Google declined to release many variables of the study, such as the number of advertisers whose performance was tracked and the portion of increased ROI attributable to click discounts via Smart Pricing.

Google does not disclose how many of its advertisers opt for their ads to be shown on its AdSense for Content sites.

"The content network is working," Keane said. "AdSense is providing considerable returns for our advertisers and valuable returns."

Google's content network, introduced in February 2003, has grown considerably. Thousands of Web publishers, including the majority of the most-visited Internet sites, participate in AdSense for Content. Google has moved to diversify its inventory with the test of Gmail, which shows content listings targeted to the text of e-mail messages.

"The performance of their product has improved over time," said Karl Siebrecht, vice president of strategy and product management at Atlas DMT, adding, "The product is still relatively new."

Google's success in building a content listings network has spawned competitors. Smaller content listings networks include Kanoodle, ContextWeb and Quigo. A proliferation of ad networks, showing both text and graphical ads, has heightened the fight for publishers' real estate.

Google and other providers hope their contextual listings networks can satisfy marketers' desire for more leads than search can provide. Emily White, an AdWords manager at Google, said that search sites comprise just 5 percent of page views on the Internet.

"To be a very successful company, we need to find targeted ways to tackle different content on the Web," she said.


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