Left vs. Right: Is Google heading for a fall?

05 May 08 - Mark Klein

Search pages in Google are divided into two parts. On the right are the paid search entries, advertisers who pay Google whenever someone clicks on their ad. On the left is what is commonly called organic search, results turned up by Google’s algorithms for searching the web based on your request. Most people start with organic search, often not going beyond the first five or ten entries. People use the left column results about three times more than the right column ads, according to some estimates. Your mileage may vary.

Strictly speaking, Google makes no money from organic search; those results are merely a platform, an opportunity for Google to post the pay-per-click (PPC) ads in the right column. Almost all of Google’s revenue comes from paid search, the right column ads. It is the primary vehicle for customer acquisition, especially in the SMB space.

However there are signs that the world is changing. More and more companies are realizing that the organic search results in the left column are much more valuable than right column listings. Search Engine Optimization (SEO) is all about setting up your web site to show high in the organic search rankings. It is not easy to do, and a limited number of people know the skills, but more and more companies are trying to learn those skills. As they learn them, they are cutting back their PPC budget and putting the money into SEO. I suspect “SEO for Dummies” will appear soon.

This trend could spell trouble for Google. The company reached its dominant position by solving two problems: 1) how to build a better search engine, and 2) how to monetize that solution. The monetization was in that right column, the PPC ads. Now, as companies switch their emphasis and marketing spend to the left column, Google’s PPC revenue could take a hit. If this hit impacts their R&D spend, some new company could develop a better search engine and reduce their market share, further depressing PPC revenue. There is the possibility of a vicious feedback loop.

There are a few factors working in Google’s favor, however. One is advertiser inertia driven by Google’s enormous market share. A second is the limited number of slots on that precious first page. Even if multitudes of companies figure out how to optimize their sites, there are still only a few that make it onto page one. The rest might have to resort to PPC for visibility.

As for us, Loyalty Builders is shooting for the top of the left column. Look for us there in a few months.