Adwords Is Dying and Google Knows It (and they are doing something about it)

Adwords accounts for almost all of Google's revenue. The flagship advertising platform is showing no signs of slowing down, but the company is still proactively preparing for "life after Adwords."

 Before you say it, I know what you're thinking. "Adwords is a multi-billion dollar platform serving billions of searches and millions of websites every day. It's not dying, it's thriving!"

As of this article, there is no doubt that Adwords is still trending positively. More websites are going live. More people are on the web and searching. More advertisers are trying to reach these people. Why would Google be worried?

Over the years, Google has developed or acquired some excellent services (like YouTube and Gmail) and even more awful services (like Wave and Buzz), but the one constant has been Adwords. Despite its success, Google knows that two things are growing faster than "old school" Internet and will likely start chipping away from standard search and advertising platforms: mobile and social media.

As a result, they have made some recent moves that lend to their idea that a rolling stone gathers no moss. Their thought process: while they're on top, now's the perfect time to take some chances and bet on the future.

Here are some of the recent changes that support the premise:

Google Places Integration with Organic Search

Google Places Changes

In late October, 2010, Google integrated Places and Reviews into many of their organic search results. They changed the ranking system to coincide with their organic algorithm, put reviews and other information inline within their organic listings, and moved the map itself to the top of the right sidebar (and it stays there as you scroll up and down), a prime spot normally reserved for Adwords.

On the surface, this seems like a bad move. One could argue that making the search results more relevant and informative will increase their already-massive market share and help them achieve complete search domination. It's a valid argument, but unlikely.

There are ways to improve search results without hurting your revenue stream. No, this is a play for something else. We'll discuss that "something else" below.

Marissa Mayer's Move

Marissa Mayer

When you're heading up the department that accounts for over 90% of a multi-billion dollar company's revenue, the last thing you would expect is a transfer to another department.

That's exactly what happened. In moving Marissa Mayer from Search Products to Geo/Local and promoting her to the operating committee (Google's highest "club"), Google made clear where they think the money is going in the future.

"Marissa is moving over to an exciting new role covering geo/local, which is crucial to our users and the future of Google," a Google spokesperson said in a statement.

In an iPad, iPhone, Android world the future of many companies lies in geo/local. Google is no exception.

Focus on Mobile and Social

Google vs Facebook

Most tech companies are doing something to integrate into social media and mobile technology. It's the direction (singular, as they seem to be moving hand-in-hand) that makes the most sense with traditional Internet actions such as search and email giving ground to new media actions such as sharing and status updates.

There are dozens of studies to support this and I won't rehash them here. Google has already leaked that they are making their core products more social and they've been working on mobile ads for some time. Are the trends towards social media and mobile putting Google in a position where they are planning for Adwords' eventual demise?

Okay, So Adwords Isn't Dying. Yet.

"We're dying from the day we're born."

The numbers and trends point to continued success of Adwords as the largest Internet ad platform in history. Those numbers are, however, short term, and Google is not waiting for the trends to turn down before doing something about it.

Many of their actions over the last few months (and possibly longer) would be considered by most to be harmful to their most profitable product, but that's the point. Hit it hard now while it can withstand the punishment.

Move Adwords down on the search results page and add revenue-free distractions while it's still generating billions of dollars.

Move one of the most successful technology company executives in history to another department so she can work her magic there.

Move your focus from something that has worked for a decade to something that will likely work for the next decade.

These are all moves that point to the eventual demise of Adwords. When will it happen? 2011? 2012? Unlikely, but in a world that moves as mercurially as the Internet, one never knows. Google's not going to wait to find out.

 

[Photo by Zach Klein]

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11 Comments

  • William MATAR

    For me Google Adsense is not dying.. all is fine.. sometime there is down but in general all is fine and i get revenues and increase

  • Randall Gniadecki

    I think there are several features that have been added to AdWords recently (the last 6 months to 1 year) that you are overlooking that have helped Google bring more value to the mobile and Geo/Local markets. The first is the integration of AdWords with Google Places. The continue to make it easier for advertisers to include extra information in their ads such as the business address. As a separate extension advertisers can enter in a phone number. Heck, as far as Geo-targeting goes Google is the only ones doing it right. I have run campaigns that covered as little as a square mile and only saw a very small amount of "bleed" outside that area in ad serving. Finally, sure social marketing seems ghreat to a majority of marketers due to the segmenting and demographic data, but for B2B marketers no dollar could be wasted more than the one spent on social advertising, great for B2C, great for healthcare, absolutely fire anyone who does B2B marketing and suggests a Facebook ad. As far as Mobile goes if you dive into Google's settings they have some good options, but they simply don't serve that many ads there, I am sure a mobile advertising company will be one of their next acquisitions.
    I appreciate what Jeff contributed about the CPA and GAN, but feel that what is really more essential is that Google is targeting these niches you speak of already, they do Local better than anyone. Now if only Orkut actually caught on in the US the way it has elsewhere in the world this conversation would be very different.

  • Petya Miteva

    I have been struggling with the idea of Facebook and B2B marketing for a while as well. At this point, I have to agree that Facebook is just not the place for that - people simply wear their private life hats there and not their business hats. So in that sense, Facebook will not be able to take over Google, no way.

  • laurabetterly

    Don't forget that Google has bought AdMob-the largest mobile advertising platform. Add that to the fact that Google Place pages are already mobile enabled.

    If you look at the size of the mobile web (stats like over 50% of all social media interaction occurs on mobile devices, etc.) Google has to step up--CTR rates are down and CPC is up. People are looking at sponsored ads on Google with "banner blindness..."

    This local/geo move has everything to do with mobile and is smart. Google is number one today--but Facebook is giving them a run for the money. Can anyone remember AOL and the market share they used to have???

  • JD Rucker

    @Will - Google is better than most at understanding the global market needs. I'm not going to be a Google apologist, but they know that there are international shortcomings they need to fix. Not sure why they aren't fixed yet.

    @Jeff - Wonderful points. This article started off as a highlight of the changes and morphed to include more of an advertising and marketing spin. The "sexy" topic du jour is mobile/social. The insider's understanding of the internal and somewhat-misunderstood juggernaut of Google's advertising network is definitely a more important issue to understand for those deeply-embedded in the industry, but for the average searcher/advertiser scratching the surface with the "sexy" was all that I wanted to touch on.

  • Jeff Molander

    Hi, JD. Indeed. Sorry... you didn't miss or overlook anything. Bad word choice. All the best to you.

  • will egan

    I think anyone that is working with adwords and SEO will agree there is a major shift towards localization of SEPS, what fustrates me is that here in Ireland, relevent support systems are not in place for places (no pun intended). "Report a problem" - not supported. Contacting help regarding duplicates, merged listings not offered.
    I have no problem with change but to do it without setting the right foundations seems moronic act.

    Will

    PS thanks for the article.

  • Jeff Molander

    Yes but you've missed a significant part of the story, JD. Just three years ago Google had no offering at all in an area that it will soon dominate. Cost-per-acquisition (sale/lead) marketing. It's doing so using its control over web search -- which it dominates. And it's just as big as the Geo/Local opportunity in my estimation. Consider how the pay for performance model is even more appealing to advertisers when they pay **only on a sale or lead**. (not clicks)

    Here's the skinny: Google now offers preferred search ad placement and superior search ad terms to the advertisers who agree to use Google Affiliate Network. It even places IMAGES in ads. Yes, actual product images ('display') in cost-per-action (not click) ads that appear where (formerly) cost-per-click AdSense ads run. Ever see that before? We haven't.

    So Google is tapping a totally new revenue stream. It's literally becoming, itself, an affiliate of its advertisers. And placing ads directly in AdWords results slots.

    Here's where it gets rich for Google: Many of Google's advertisers (if not all) are competing with their own cost-per-click/Adwords campaigns in the same space. Confused? Don't be: Just pay Google. Indeed, pay Google an inflated cost-per-click price since Google itself (through the GAN division) is now competing for search terms with other advertisers. The price of that limited amount of space, in Google's auction, now goes up... for all advertisers competing for that search term.

    Competing affiliate networks like Commission Junction (a Valueclick company) can't match these benefits. In fact, Google's bundling strategy threatens to give Google a position of power in yet another online advertising market.

    So while I appreciate the Geo/Local market representing an opportunity the new "GAN aspect" is also worth mentioning. Cheers!