Some Google advertisers cutting spending, keyword pricing rises, dissatisfaction with roi

It appears that some of Google's largest advertising clients may start to shift some money away from traditional keyword buys in 2007. This news comes from MarketWatch who spoke with eBags and other merchants about the changing in their online ad spending.

eBags co-founder Peter Cobb said, "The Google percentage has got to go down."  Article author Ben notes regarding eBags:

In many cases, the cost of an eBags.com ad placed on either Google's own Web site or one of its affiliates now equals 45% of the price of the product it promotes. That's crimping the company's own profit margins and forcing it to look elsewhere to market its bags.

Other advertisers are seeing an increase of 40-60% per keyword. Dan Sackrowitz, chief executive of Bare Necessities, which sells lingerie online saw his Google ad budget soar 50% last year. Jack Keifer, chief executive of baby goods provider Babyage.com, said his search ad costs more than doubled in 2006.

Lastly the article discusses some increased dissatisfaction with the return on investment (ROI) they have received with the Google advertisements. "Shmuel Gniwisch, founder of online jeweler Ice.com, got a conversion rate of less than half a percent for the $750,000 worth of ads he placed through Google."

I think what will be interesting to watch is how the ads on Google change this year. I think that a boost in innovation is due and will be forthcoming. That boost will lift Google's revenue once again but it will be required to innovate. The basic text ad has reached its mountain I believe.