Uncommon Wisdom

Mar 3 2008   2:18PM GMT

Golden Google: Signs of reality?

Tom Nolle Tom Nolle Profile: Tom Nolle

Business Week has joined other publications and sources in noting that Google may be experiencing the signs of decay in its basic click-through ad model. Google’s stock sunk when its reported clicks dropped in January, and investors began to worry whether the Google model was recession-proof. We think that click ads have their place, but we’ve continually noted that the majority of ad spending today (which exceeds $700 billion worldwide) is directed at models that don’t translate well into clicks. This isn’t to say that online advertising could not, at some point, take over for virtually all ad fulfillment—it likely can. However, the click model isn’t going to be the way to get there by itself, and the industry needs to address the question of what kind of flexible online model will work in the long run.

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