Reduced Click Area Yields Lower Profits

Due to a shocking  below-expectations profits margin for the fourth Quarter, Google saw shares tumble, losing $11,000,000,000 in market value (yes, that is $11 Billion!). While I am certain that the down-turning economy played at least some role, I think that a new ad-system by Google may have also been responsible.

In the final quarter of 2007, Google altered that ad-block for its popular cash-cows, Ad-Sense and Ad-Words, allowing only the title itself to be “clickable”. Previously, any part of the advertisement – the Title, Description, or Display URL – would trigger a hit if clicked upon by the user.

As was outlined by the good folks at Efficient Frontier, and certainly backed up by our own statistics over especially the December month, it appears that Google may have bit the hand that feeds it. A consistent drop across the board of CTR, especially during the crucial holiday months, could have explained at least some of Google’s earnings losses.

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