At the start of the year there were a lot of reports foretelling the death of Google’s Pay Per Click (PPC) Platform, Adwords and Google have silenced all those doubters. Last quarter (ending 31/03/08) profits for the search engine giant were up 30% from the previous quarter.

Profits have been announced at $1.3 bn, with pay per click sales up a huge 42% to $5.2 bn. The volume of clicks on the PPC links has slowed in growth from 25% growth at the end of 2007 to only 1.8% growth in this first quarter. This announcement from Google is also the first occasion that more than half it’s PPC revenue comes from sources outside the US. This demonstrates that the European pay per click markets and competition are growing faster than the US. It would also point to some strong growth in some of the developing e-commerce market, as more businesses take up PPC campaigns and realise the potential of qualified traffic from pay per click.

The strong last quarter performance could shake Microsoft in to taking swifter action in their potential Yahoo take over. If Google’s dominance in PPC advertising continues, Microsoft may find themselves frozen out of the pay per click market completely.

Yahoo are continuing to hold out on the Microsoft bid, serving Google ads for some of their searches. While most see this a toying with Microsoft, proving they do have other options, it is still putting more pay per click sales and revenue in Google’s bulging pockets!

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As credit gets crunched and economists wake up with dark circles under their eyes, belts are being tightened across all markets and industries. During these lean times, some companies may be thinking about slashing their monthly Pay-Per-Click (PPC) budget. Even if this wasn’t the case, no one likes spending more money than they have to. Many of our smaller clients ask to kick off their PPC campaign with a small, sometimes unrealistic budget. They often say: “If the PPC campaign is successful, we’ll give you a blank cheque and spend whatever you want … but until then let’s start on £3.85 a day.”

As the threat of recession looms and businesses watch their outgoings like a hawk, you may want to consider the following before taking an axe to your PPC budget. If a PPC campaign is underfunded, your ads will not show consistently, but rather they will show intermittently throughout the day. In this instance, you may see your ad for 1-in-3 or 1-in-4 searches on Google, Yahoo or MSN. Alternatively, if your PPC campaign is under-budget, your may blow your entire daily budget by four in the afternoon (or sooner) and, therefore, you will miss the surge of traffic in the evening, as people return home from work and go online.

Although a business may be cutting back their PPC budget to save money, this may self-defeating and have completely the opposite effect. By not showing your ad for every possible search, you have to hope that when your ad does appear, it will show to a person who is at the very end of the buying process and eager to make an online purchase or enquiry. Showing your ads sporadically and hoping for a converting click is a dangerous, unpredictable game to play.

Let’s say there is 10,000 impressions for your keywords. Out of the 10,000 searches, 100 people are ready to buy something or make an enquiry. If you meet your budget obligations with your PPC campaign, you know that your ads will definitely appear to every one of these valuable 100 customers. If you only have the budget to appear for 1-in-3 or 1-in-4 of the 10,000 searches, its pot luck whether or not your ad will be seen by these 100 people.

No one will argue that cutting your PPC budget will save you money in the short term. However, if you miss out on too many conversions by not funding your campaign fully and maintaining a continuous presence in the search results, you may lose more money that you save.

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