An article in this weekend’s Barron’s argues that an eqal threat to Google, alongside click fraud, is click truth. Huh, you say? Well, here is writer Thomas Donlan:
Google’s best selling point — advertisers can learn which clicks produce sales — is potentially its biggest hazard, because advertisers can also learn which clicks don’t produce sales, and scale back their advertising budget so that less of it is wasted.
This may not kill Google in the world of advertising, but it will force it to change every bit as much as Google and its Internet cohorts are forcing TV, newspapers and magazines to change.
Forced change is an opportunity to stumble. And in the world of stock-market speculation, Google — selling for multiples of future earnings and cash flow that imply impossible growth — is already a disaster waiting to happen, although nobody knows when or how the market will force a revaluation.
So, as I understand Donlan’s argument, he is saying that advertising budgets are the size they are largely because people don’t know how much waste there is in advertising. They over-spend, but they don’t know by how much they over-spend. Once people know better how much ad spending is wasted then the ad market will shrink, or so Donlan’s argument goes.
I don’t disagree, but hasn’t this happened already? My sense is that most advertisers already pay far more attention to effectiveness when comparing online to offline advertising. So sure, you will not ever see a dollar-for-dollar flip of offline spending to online — that wouldn’t make sense, in part for some of the reasons Donlan cites — but I think advertisers (and Google bulls and bears) knew that already.