Google argues that the plummeting click-through rates on its ads are a good thing – but advertisers aren't buying it.

A major change Google made in early March to its AdWords algorithm is resulting in a double whammy for some advertisers: The rates they're paying for ads have rocketed while conversion rates for those ads have dropped. Disgruntled advertisers have dubbed the move the "Google slap."

"If it were just a rate increase, I would have tolerated it. But my ad rates have doubled and I've got no business," says one longtime AdWords advertiser, "Sam," who doesn't want his real name published for competitive reasons. He says he runs a very specialized niche service, and doesn't want his competitors to know about his current business crisis.

Google has argued that the recent drop in paid clicks on its advertisements is intentional. The logic is this: If Google serves fewer but more relevant ads for any given search query, it can potentially increase click-through rates and ultimately raise ad rates. That should be beneficial for advertisers, who may get fewer but better quality leads from their ads.

The affected advertisers say it isn't working according to plan. "Sam" says he got about 100,000 impressions on ads served for two keywords in February (which resulted in $250,000 in revenue), and in March that number dropped to 20,000 impressions and essentially zero revenue. To compensate for lost sales, he says he started buying advertising from Yahoo and Microsoft.

It's not clear exactly how Google altered its algorithm, but many online marketers believe the company adjusted advertisers' quality scores, based on the content of the landing pages on their websites.

"I've put a lot of thought into this, and this has been one of the trickiest [changes] to understand," says Amit Mehta, an internet marketing blogger. "Google is really opposed to these thin affiliate marketing sites that people put up just to run advertising on. They want to promote real websites or people with real businesses, and they've gotten really good at sniffing out advertisers who are just there to make a quick buck."

Mehta says he's heard from at least one affiliate marketer who was spending $600,000 a month on a couple of ad campaigns that were killed by the recent algorithm change.

"[Google] is probably tracking factors like, how often the advertiser updates their site. Are they adding fresh content? Are they doing all the things a legitimate business would do?" Mehta says.

For his part, Sam insists he's not an affiliate marketer and denies that he was hit because he violated Google's terms of service.

While any sort of change is bound to affect advertisers differently, Jeremy Chatfield, an analyst at Merjis and a web marketing and search-engine optimization consultant, says he's heard from other advertisers who have seen similar trends.

"I am seeing large-scale advertisers whose general cost per clicks is trending up ... and they're seeing impressions go down," Chatfield says.

Have changes at Google had a major impact on your business since early March? Let us know in the comments, or drop us a line.

Photo: Jim Barter/Flickr

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