This Study Says People Aren’t Clicking On Online Ads
MATT WARMAN, THE TELEGRAPH July 22, 2013
Falling like dominos, every major company on the web is succumbing to he pressure of a world that is moving from using computers to mobile phones and tablets.
First it was Microsoft, which this week reinforced the view that it was struggling with tablets by posting disappointing numbers. But alongside Facebook and Intel now even Google, which runs the Android operating system driving the very growth of mobile phones, also said this week that the difficulties of making money off advertising from smaller screens is a huge challenge.
The most successful brands remain those, such as Twitter and Instagram, which continue to largely avoid advertising all together. And the bad news for Google is that much of what its susccess is based upon is, by some measures, less effective than advertisers have thought anyway.
An academic study concluded that brand adverts in internet searches have “no short-term beneﬁts”, and added that “returns from all other keywords are a fraction of conventional estimates.” The study’s author Byron Sharp, Professor of Marketing Science at the University of South Australia tweeted, “Google won’t like this”.
Perhaps unsurprisingly, the study concluded simply that as users become more familiar with the web, they get savvier at avoiding adverts. “New and infrequent users are positively inﬂuenced by ads but existing loyal users purchasing behavior is not inﬂuenced by paid search,” he found. With much of the web funded by advertising, and more advertising needed to make mobile pay, it seems that web business is becoming even more difficult.
Indeed, only Apple and Samsung have seriously profited from the move to mobile – both, as the makers of hardware, however, are in fundamentally different businesses to Google. Facebook, has come in for increasingly sharp criticism as it seeks to encourage more users to look at adverts for applications they don’t want, or at adverts that aren’t quite relevant. If too many happily married people see commercial content for divorce lawyers, or if big brands see their adverts next to groups abusing women, the site’s appeal rapidly abates. It underlines the challenges not only of all advertising online, but in particular the challenges facing brands that must adapt quickly to those shrinking screens.
Why Microsoft is struggling
The travails of Microsoft can be traced back to an act of foolish bravery on the company’s own part. After Windows 7, it realised that the rise of Apple would see a growing number of users wanting to have tablets as their main devices, and decided that the next version of Windows had to be as good on tablets as it is on PCs. Many critics believe that even if the company has achieved that, they still haven’t done anywhere near enough to challenge Apple or Samsung, which makes the most popular tablets using Google’s Android operating system.
That was why this week Microsoft took a $900million write down on its Surface tablets, the devices that were supposed to kickstart its bid to get into the area in which it is rapidly losing ground. The Windows 8 operating system, has yet to provide a serious tablet fillip for Microsoft, and has yet to stem the PC decline. Some analysts now fear for Microsoft’s whole strategy.
Google’s new search
The search giant’s results this week demonstrated two key things: it continues to be a dominant force on the web, and it has no serious rivals. But even it has been taken by surprise on mobile phones: it built the operating system that now accounts for the majority of all devices, and claimed that doing so would drive traffic to Google. So far so good, but on mobile Google is struggling to find a way to make the adverts that pay its wages attractive enough for users to click on.
And increasingly Google has designed products that look clean and elegant, and consequently lack the space for ugly adverts. It is adopting an approach that may well make it ever more dominant without making it ever more profitable.
In New York, Google shares fell and the company now looks less likely to break the psychologically important $1,000 barrier – but the market continues to believe that, thanks to driverless cars and more, profits will continue.