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How does Google outperform expectations?

In 2007, Google’s search business, which is predominantly comprised of the common text ad, produced $10.6 billion dollars in revenue. That’s $10.6 billion dollars for essentially selling one 25-character title, two 35-character lines of body copy and one vanity URL of the customer’s choosing. That’s an amazing return for such a simple and easy-to-deliver service. Still, Google struggles with what seems to be their single remaining obstacle: investor expectations.

Analysts (and Google itself) expect outrageous margins and consistent innovation home runs. Fair enough for a company that has consistently achieved in this arena, but (aside from quality score) I can’t help but wondering why Google has kept innovation and product diversity away from the core of their business, the text ad.
For arguments sake, let’s say the average cost-per-click (CPC) in 2007 was $2. If that was the actual number, there was in the neighborhood of five billion paid clicks. If Google could make an extra 10% premium on even half those clicks, they would clear an extra billion dollars. How could they get people to pay 10% more? Suppose Google offered the option to write a third line of body copy for that 10% premium?
To begin with, search marketers would have increased potential for persuasion. Let’s be honest, even the best copywriter can’t make miracles happen with 70 characters. As a search marketer, I would absolutely pay a 10% premium on my click to get an additional 35 characters. An additional line of copy gives marketers the ability to convey a more complete message. It also increases their relative share of voice on the page. A higher share of voice and more complete messaging should then result in higher clickthrough and conversion rates.
A better user experience would likely result as well. As a Google user, an extra 35 characters on a search ad would make me more informed about what I was clicking on. Natural search results get about four times the number of characters and, if they’re well-written, infinitely more informative. It’s no wonder that they get more than three times the number of clicks.
The biggest improvement would likely be to Google’s bottom line. Obviously, all of these numbers are estimates, but when you start to play with the math and take into account higher clickthrough rates and different cost premiums, you end up with a ton of money every time. Implementing this simple innovation could line Google’s already deep pockets with another billion or two dollars a year, and make those expectant shareholders happy again.
If you’re reading this and think I’m crazy for suggesting a fix to something that ain’t yet broke, ask a Microsoft shareholder how well that attitude is working out.

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