Google - the amazing perpetual revenue engine

Google is truly an amazing revenue generator. In the last six months, our PPC advertising costs on select key-words have risen almost 300%. So, in order for a specific key-word to show on the first page of search results in positions 3 - 10 we are now paying $3.50 per click versus ~$1.20 in July 2007.

The cost increase can be attributed to Google's AdWord tools that prompt advertisers to optimize their campaigns and increase their positioning. Typically, all this means is that you need to increase your per word spend. Each time an advertiser optimizes their campaign, all other advertisers in the category suddenly need to re-optimize theirs. To add insult to injury, the optimized results are typically broad matches with inefficient campaign structures. A bit of a vicious and expensive cycle.

From a business standpoint, the efficacy and cost-effectiveness of Google AdWords is starting to go down. Given Google's higher CPC we have begun to shift advertising $$$ to other vendors and other mediums. While there are oversight and reporting costs of managing campaigns across multiple engines and mediums, financially it makes sense. Over time, I would expect a similar reaction from other advertisers. There is no such thing as a perpetual motion engine and given the alternatives, I don't expect Google to become a perpetual revenue engine either.