The Germans have a word for it…and it’s Schadenfreude. Literally translated it means ‘shameful pleasure’…a more useful definition might be the pleasure one feels in watching a good friend fall off a roof. In case you missed the story, owing to a monumental blunder (which I have to imagine is going to cost somebody very dearly) Google inadvertently released their Q3 2012 numbers minus several important items in the middle of the stock trade day. The less than stellar numbers caused the stock to plummet 9% and they suspended trade while they figured out the snafu. Not sure whether Curly, Larry (Page) or Mo hit the publish button but the error over shadowed their earlier blunder when they published info about their new Chrome tablet ahead of the actual announcement. Guys…was there a party I missed last night?
Leaving aside the inadvertent hilarity (funnier than Binders of Women IMHO) part of the market reaction was driven by the trend in their core Pay Per Click business. I have mentioned in multiple other posts that Google has seen a long term depression of the average cost per click over a good while. It’s driven in good part by the explosion of mobile traffic which typically commands a fraction of the price of desktop clicks. The other factor depressing the numbers is the cost to acquire the traffic; the money they pay their partners for their traffic.
At the risk of going out on a limb here I think part of the problem (ironically) is Google’s fanatical focus on owning as much of everything directly and its profound suspicion of the larger online ad market. There is an ocean of search out there and it’s growing every day. Billions of search driven clicks coming from an enormous array driven by desktop and mobile devices. A great deal of this traffic from all over is not monetized by Google at all. Google has always wanted to own as much search as possible and that’s entirely laudable. They have also been incredibly fierce in protecting their advertisers from poor quality traffic…again entirely laudable. The net of those drivers is that whilst they do have the majority of the highest value search and advertisers they are so conservative about adding new or different sources of traffic they are potentially missing out on a lot of the growth in less conventional search, not bad search just not as conventional. That is likely to keep their cost of acquisition higher than it needs to be and reduce their overall PPClick revenue. I have no illusions that Google will take my advice for a moment, access to their super high value advertisers will remain a virtual impossibility…but trust me there are hundreds of millions of good clicks which would mean hundreds of millions of incremental dollars going dramatically under monetized….and after today those dollars could come in handy.