The Click Dilution Effect

Google’s Q2 numbers are out and they are terrific. They are up 35% at about $12.2 billion, but when you look at the details some interesting questions emerge. Whilst they managed to move the revenue very nicely, they had to sell a lot more inventory to generate that number. The over all cost per click paid by all of their advertisers dropped 16%, continuing a decline that started in Q2 last year.

At the heart of this decline is the rapid growth of mobile inventory. Overall, mobile ads continue to be significantly cheaper than web ads, and with the continued and increasing growth of mobile usage that trend is likely to continue. At least part of this trend is generated by the squeeze that media growth has produced in recent months. Social media continues to generate massive ad inventory, while the opportunities for advertisers to reach end users continue to expand.

It’s interesting to note that as print media continues to decline it might lead you to think that reduction in inventory might drive the pricing up. However, national advertisers are still the major moving force in the market. They are driving the dash to mobile and taking advantage of the luxury of large volume, low cost advertising. We are currently testing multiple new media to drive results for our huge base of local businesses and so far it looks promising. Mobile is certainly leading the way (which makes perfect sense) but we see promising data from local display, as well as the more traditional SEO and SEM approaches we already employ….I’ll keep you posted on progress.

In an interesting but not directly related marketing story, it’s interesting to see the heat generated by the Chick-Fil-A. It’s been long held by many, especially those in the gay movement, that Chick-Fil-A is not gay friendly. Even so, for the CEO to come out recently that the company is “guilty as charged” is actually quite shocking in marketing terms. The company rapidly followed up with an ‘up with all people’ clarification because ‘awe shucks…we are all just people but the cat is out the bag. There will no doubt be a few days of excitement as talking heads make much of the Muppet defection or the support from Mike Huckabee. The right will defend freedom of speech and the left will cite equality under the law….the whole thing will be old news by the time the Olympics start. But…I believe there is a real “But” here. In marketing terms, there are (according to multiple sources I could find) roughly 9 million gay and lesbian people in the U.S. That’s roughly the equivalent of the population of the entire New York metropolitan area. Can you come up with a marketing or business context where the boss of a major fast food chain would come out against all of the inhabitants of any age of the entire greater New York area? No, I couldn’t either.

It is possible for one careless or ill though through gaffe from the guy at the top can have disastrous results. Way back in 1991 long before social media, Gerald Ratner, who used to run the largest jewelry retailer in the U.K., was speaking at a private function at the Institute of Directors in London, he joked about the quality of his companies products…“We also do cut-glass sherry decanters complete with six glasses on a silver-plated tray that your butler can serve your drinks on, all for £4.95.” People say, “How can you sell this for such a low price?” I say, “Because it’s total crap.” And went on to joke about the quality of their earrings … “cheaper than a Marks and Spencer prawn sandwich, but probably wouldn’t last as long.”

His own version of, “Guilty as charged.” We always knew that their products were cheap and nasty, but to hear the boss joke about them brought it home.  Brits boycotted the stores…the company crashed, he resigned and the group had to rename itself, destroying billions in value.  Let’s see if there is a Chick-Fil-A Ratner’s effect.

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