Click rates on sponsored search links may be down, but is it just a blip??

Click rates on Google’s sponsored links are faltering in the UK for the first time, according to a leading brand owner and sources from two top search marketing agencies.

While general searches on Google are thought to be growing, observers fear that sponsored links – the paid-for ads that appear on the top and side of the search results page – are starting to attract fewer clicks.

Google handles some 80% of online searches in the UK, and UK country manager Matt Brittin claims paid-for clicks are “steadily improving”. He argues that it is the “quality” of clicks – how likely they are to lead to a sale – that is important, rather than overall numbers.

However, one senior advertiser says: “Our view is that the volume of paid-for clicks seems to be down overall,” though he declines to give details.

At the same time, search marketing agency Spannerworks chief technology officer Paul Doleman adds: “There has been a slight dip.” His clients have experienced a 2% decline in clicks on paid-for links in October 2007, compared with October 2006.

He says this is the first time his agency has recorded a fall in paid-for clicks in the UK. However, he adds that his clients’ clicks have grown 40% cumulatively over the year: “This could just be a blip.”

Meanwhile, digital media agency Agenda 21 founder Rhys Williams says Google is continually widening the scope of its searches and giving more information, such as images, videos and maps.

“Google has been experimenting with its paid-for search listings,” he adds. “Some have said that when people get back images, videos and pages from blogs, it can affect the paid-for click rate, and that busier search content has pulled clicks into natural search [the main results on the search page] and away from paid-for search [the sponsored links at the side and top].”

Diminishing interest
Williams believes that sponsored links have lost some of their attraction, as increasing numbers of direct-response advertisers use them: “I don’t think sponsored links are growing as they used to – we are not seeing the click rates of old. People are having to work harder to cut through – the copy is bland and everybody is doing the same thing.”
Not everyone agrees that paid-for clicks are in retreat. “I would be very surprised. Budgets are up year on year,” says Media Contacts head of digital Paul Frampton.

Revenue growth
It should be remembered that Google’s revenues are growing strongly in the UK. The US search giant last week announced third-quarter results showing UK revenues of $661m (£323m) for the three months to June 30. This is up from $600m (£293m) in the second-quarter and $578m (£282m) in the first quarter.

Google’s Brittin plays down suggestions that clicks are decreasing on sponsored links. He says: “The overall picture is positive on click rates. It’s a market where I would expect some advertisers to see click rates decrease. It could be that their offer has become less competitive or a new rival has come in. It could be for a myriad of reasons, unrelated to anything Google is doing.”

He adds that, in the US, Google has launched a Universal Search service which pulls results from video, images, news and a variety of sources.

Elements of Universal Search have been introduced in Europe. Brittin says/ “If a user sees an image of a Nokia phone and clicks on it, rather than on an ad, that is not bad for advertisers. You could see a reduction in paid clicks, but an increase in sales coming in through different routes. What we should be thinking about is the quality of the audience we bring to advertisers.”

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