Why are Google’s click numbers dropping?

Research has revealed a significant slow down in Google’s click through rate, triggering a flurry of debate among web experts about why it has happened and what it means for the web giant.

Time Business reports that online metrics company comScore measured just 0% and 3% growth in click-throughs from paid Google ads between January and February 2008 and the corresponding months in 2007.

That compares with year on year growth rates of between 25% and 40% recorded over the last couple of years. Clearly, something has changed – the question is, what?

Google argues the decline is because it has redesigned ads to achieve fewer, better targeted clicks. It says it has done things like reducing the space around a word that results in a click, thereby reducing the number of accidental clicks but hopefully increasing the proportion of genuinely interested people who go through to advertisers.

That view is supported by Google’s claim that it has achieved steadily increasing revenue per click, but analysts are divided over whether this will compensate for the decline in click numbers.

American Technology Research analyst Rob Sanderson argues per-click revenue should lift quickly if advertisers are starting to see more value from each click because they’ll pay more for them at auction.

“It’s not clicks that advertisers are really buying, it’s what those clicks get them, which is sales conversions,” Sanderson says.

But RBC Capital analyst Ross Sandler is less positive. “You can’t avoid the trend. Something that was humming along at 40 per cent is now near zero – something is going on there. Especially when the economy is getting a little twitchy,” says RBC Capital analyst Ross Sandler told Reuters.

He has cut his 12-month price target on Google to $US530, reportedly one of the lowest prices on Wall Street, because of the decline in clicks.