Is online advertising really 'that' big? (Regarding Google)

[Dominato3r]

So the news is that Google just surpassed Microsoft in market valuation, although Google still behind in raw earnings/revenue.

http://www.theverge.com/2012/10/1/3438630/google-microsoft-market-cap

I wonder though, I never click on these ads, never pay them much attention, how the hell does this business make any money? I don't imagine that my line of thinking is much different from the average joe either.

They've got other products like Android, their compute cloud, but those are still far a ways off from being their top earners. Can someone explain this to me?

 

[Jeff7]

...
I wonder though, I never click on these ads, never pay them much attention, how the hell does this business make any money? I don't imagine that my line of thinking is much different from the average joe either.
...

They are everywhere. They also own Doubleclick, and a few others.

 

[Train]

I show ads on a few websites I run. If you have the right demographics, you only need a 0.1% click through rate to make a decent amount of money. That's one click per thousand ads shown. Some companies are more than happy to shell out good money for that kind of click rate.

 

[AstroManLuca]

I've always wondered about this too. I never click on ads and I wonder what advertisers really think they're getting out of it. They must think it's valuable if they keep paying Google enough money to make them such a big company.

I sometimes think we are in an "advertising bubble" where we're so inundated with ads that people are starting to tune them out. Advertisers are still paying for ads but at some point they'll have to catch on that they aren't really worth it. Or maybe I'm totally wrong.

 

[dave_the_nerd]

We have so many ads that we click on them by accident. Grandma buys something because she can't find the close button, computer is infected with malware trojan, investment in advertising pays off and the circle of life is complete.

 

[lxskllr]

I sometimes think we are in an "advertising bubble" where we're so inundated with ads that people are starting to tune them out. Advertisers are still paying for ads but at some point they'll have to catch on that they aren't really worth it. Or maybe I'm totally wrong.

It's all smoke and mirrors, just like fiat currency. It has value because people say it has value, but it's completely baseless.

 

[Dominato3r]

I've always wondered about this too. I never click on ads and I wonder what advertisers really think they're getting out of it. They must think it's valuable if they keep paying Google enough money to make them such a big company.

I sometimes think we are in an "advertising bubble" where we're so inundated with ads that people are starting to tune them out. Advertisers are still paying for ads but at some point they'll have to catch on that they aren't really worth it. Or maybe I'm totally wrong.

Maybe. By the the time the current generation comes around to being old geezers. Most people I know who aren't tech-savvy automatically think an ad is a virus.

 

[AstroManLuca]

It's all smoke and mirrors, just like fiat currency. It has value because people say it has value, but it's completely baseless.

I was just thinking that it could be hard for companies, especially large companies, to determine how much advertising really helps them. I mean, if Apple or some other company stopped advertising entirely for one month, would they really lose that much in sales? And when you think about the amount of money they spend, are they actually breaking even?

 

[theshad]

I was just thinking that it could be hard for companies, especially large companies, to determine how much advertising really helps them. I mean, if Apple or some other company stopped advertising entirely for one month, would they really lose that much in sales? And when you think about the amount of money they spend, are they actually breaking even?

I think Apple is one company that would take a HUGE hit if they stopped advertising for a period. Their marketing team is a giant part of their success. Though most companies I would agree, I never actively purchase a product based on their advertisements (Maybe food is an exception to this, though I may very well purchase that food without the advertisement) and in fact I will actively avoid companies that have too many ads or ads that annoy me.

 

[mshan]

Well, from comments I've seen on tv, the holy trinity for technology companies to figure out and monetize is social, mobile, and cloud. (would guess this has to be viewed from global perspective (e. g. emerging markets where only computer people will ever have is their smart phone) where there is presumably still a lot of growth opportunities for companies as big and domestically dominant as Apple, Google, Facebook, and Amazon).

Google appears to be a very, very, very well run company and perhaps they are perceived to be closest to figuring out that puzzle right now (?)

Monetizing mobile, in particular, seems to be seems to be real stickler for everyone (e. g. Facebook?)

Plus, if stock market continues slow melt-up through year end, you've also got hedge fund managers feeling career risk (http://www.zerohedge.com/news/2012-...k-only-8-hedge-funds-are-outperforming-market) who have to chase or their clients will dump them early next year:

As a fund manager, you've got two choices. Choice No. 1 is coming clean with your partners and admitting defeat by writing a letter along the lines of the following:

"Dear Partners,

The Fundamental Return Analytic Unlevered Delta (FRAUD) partnership is up 4% through the first three quarters of the year. Our returns would be better but I refused to take part in this bogus rally based on little more than a possibly corrupt Fed chair dumping money into the system..."

Or you can try to save your business and reputation by catching up to the broader market in the last few months of the year. Doing the latter is impossible unless you chase. You need to buy Amazon (AMZN), Apple and Google (GOOG). You have to take fliers on left-for-dead names like JC Penney (JCP) and, yes, even Facebook.

You don't believe in any of these companies and you hate them at the current prices, but the humiliation of facing massive redemptions and a trashed reputation ("Getting John Paulson-ed") is unspeakably horrible.

There isn't a real choice there. Self-styled Masters of the Universe don't quit just because they're losing going into the fourth quarter. No one starts a year expecting to be reduced to making desperate shots come October, but no football team starts a game with the intent of throwing Hail Marys. When things go pear-shaped, hard decisions must be made."


http://finance.yahoo.com/blogs/breakout/come-chasing-hedge-funds-175420357.html

Comments I've seen on tv seem to suggest that many mutual fund managers have been fully invested for some time, so incremental buyers that may be forced to chase are hedge funds and retail investor.

(Microsoft may still be a cash cow, but seems to be quite stagnant in terms of growth and innovation). And IIRC from comment I saw on tv, Apple would need to exceed market cap of 800 or 850 billion dollars to exceed Microsoft's peak in inflation adjusted terms.

 

[Train]

I've always wondered about this too. I never click on ads and I wonder what advertisers really think they're getting out of it. They must think it's valuable if they keep paying Google enough money to make them such a big company.

I sometimes think we are in an "advertising bubble" where we're so inundated with ads that people are starting to tune them out. Advertisers are still paying for ads but at some point they'll have to catch on that they aren't really worth it. Or maybe I'm totally wrong.

It's like spam, only a teeny tiny amount of people need to act to make it profitable.

Like I stated above, I can make pretty good money off of 0.1% click through rate (I just checked adsense, I am at 0.12% so far in 2012). I know other publishers who make way more than me overall but would kill for my click through rate. People can literally sit on their asses doing nothing because one out of every 10,000 people to their site clicks an ad. Certain categories are paying over $3 for a single click. Serving up 10k web pages costs next to nothing, and you can make $3 of revenue.

If you can build up an audience of a desirable demographic (like affluent 18-34 males) in something other than a forum (forums have shit click through rates)... you can make some easy cash just by plugging in Google and other ad networks.

 

[Ns1]

I don't imagine that my line of thinking is much different from the average joe either.

They've got other products like Android, their compute cloud, but those are still far a ways off from being their top earners. Can someone explain this to me?

spoken like a non-average joe.

my GF clicks ads all the time...because they are the first results (ie sponsored results). As long as they get my GF to her intended result (ie answers) she doesn't give a fuck that she got there via an ad. I'm sure this style of internet browsing is very pervasive in my family.

Compare that to someone like myself (and I imagine many on this forum) who don't even see/process the "sponsored links" area.

 

[gevorg]

Also, there is more to it than just click-through rates and online purchases. For example, brand recognition or word of mouth when you're away from the computer. If they'll bombard you with the same ad all the time, it will subconsciously stay in your brain, even if you think you have ignored it. Example: which auto manufacturer is is associated with the ultimate driving machine?

 

[Fritzo]

I read that an ad on Google's home page would have an estimated worth of $10 million per DAY.

It's not for sale.

 

[Train]

I read that an ad on Google's home page would have an estimated worth of $10 million per DAY.

It's not for sale.

Tell that to Chrome

EDIT: oh and Google+

 

[Lifted]

Advertisers are still paying for ads but at some point they'll have to catch on that they aren't really worth it. Or maybe I'm totally wrong.

I had one business which only received clients through online ads (and some SEO, though I'm not sure how successful that was compared to the ads). Not even a lot of advertising, just a few hundred dollars per month. I had more clients than I could handle, and some were very, very large. I built the business up from nothing to large enough to sell for a nice sum, in just under a couple of years, with the key asset being online advertising.

Looking back on it, those ads were easily worth 500x what I paid for them. Of course you have to know how to target the proper demographics to make any advertising campaign worthwhile. In my case I only needed a few big fish to make it all work.

 

[Train]

I sometimes think we are in an "advertising bubble" where we're so inundated with ads that people are starting to tune them out. Advertisers are still paying for ads but at some point they'll have to catch on that they aren't really worth it. Or maybe I'm totally wrong.

The advertising bubble definitely burst with the dot com bubble. But it came back slowly, and much more effectively than before. The money per traffic is less overall, but it has definetely become stable. Election years also provide nice upward bumps.

People aren't just throwing money at ads any more hoping they will work, they do all kinds of keyword analysis, budgeting, conversion rate trackers, and ultimately, ROI calculators to help you find the perfect price point to bid on ads.

 

[Fritzo]

Tell that to Chrome

EDIT: oh and Google+

Those are company features, not ads.

 

[silverpig]

Doesn't google have analytics that shows something like:

X ad impressions -> y ad clicks per ad impression -> z sales per ad click?

Businesses can track all of this.

 

[SaDiZTiKStyLeZ]

Click the ads. They get me paid. KTHX!

 

[Puppies04]

I tried internet ads and they were meh, I figure I will uninstall adblock about 2025 and see if they have improved any.

 

[AstroManLuca]

I had one business which only received clients through online ads (and some SEO, though I'm not sure how successful that was compared to the ads). Not even a lot of advertising, just a few hundred dollars per month. I had more clients than I could handle, and some were very, very large. I built the business up from nothing to large enough to sell for a nice sum, in just under a couple of years, with the key asset being online advertising.

Looking back on it, those ads were easily worth 500x what I paid for them. Of course you have to know how to target the proper demographics to make any advertising campaign worthwhile. In my case I only needed a few big fish to make it all work.

I was thinking more about very large companies that already have a lot of mindshare to begin with. I mean, GM nixed their Facebook advertising campaign, which was apparently costing them $10 million per year. Did they make $10 million more than they would have without the ads? I guess they decided that they weren't.

 

[KeithTalent]

spoken like a non-average joe.

my GF clicks ads all the time...because they are the first results (ie sponsored results). As long as they get my GF to her intended result (ie answers) she doesn't give a fuck that she got there via an ad. I'm sure this style of internet browsing is very pervasive in my family.

Compare that to someone like myself (and I imagine many on this forum) who don't even see/process the "sponsored links" area.

Yep, this. I've even stopped trying to train friends and loved ones out of the behaviour.

KT

 

[Jeff7]

Also, there is more to it than just click-through rates and online purchases. For example, brand recognition or word of mouth when you're away from the computer. If they'll bombard you with the same ad all the time, it will subconsciously stay in your brain, even if you think you have ignored it. Example: which auto manufacturer is is associated with the ultimate driving machine?

Given the thread, the first thing I thought of was Google's self-driving car.

(I don't see many ads, so I'm actually not familiar with that slogan.)

spoken like a non-average joe.

my GF clicks ads all the time...because they are the first results (ie sponsored results). As long as they get my GF to her intended result (ie answers) she doesn't give a fuck that she got there via an ad. I'm sure this style of internet browsing is very pervasive in my family.

Compare that to someone like myself (and I imagine many on this forum) who don't even see/process the "sponsored links" area.

Yup. That which my adblocker doesn't get is usually filtered out almost without thinking about it.

 

[Dominato3r]

But the self driving car is still more or less a research project. It takes a lot of effort to bring something from the lab to the market. The kinect probably took ~7 years to get to market given how long MS has been talking about natural UI.