Google and the Case of the Missing Clicks

I’ve been spending time time thinking about all the flap regarding the surprising decline in Google paid clicks.  (full disclosure – I am long GOOG in the mid 300s)  What struck me about the discussion around GOOG has been how the sagging economy is going to impact the company and it’s fortunes in a meaningful and negative way.  We’re off close to 250 points (35%) in a matter of weeks.

In order for this kind of analysis to make any sense, I would first want to understand how, in a broad sense, the categories of words that are the highest earners, in an absolute dollar sense, are impacted by this coming recession.  The discussion of whether or not we are in a recession (we are not) and whether or not we are headed into one (could be a self fulfilling prophecy) will be left for another time.  For now, what I want to talk about are mortgages.

Yes, mortgages.  I started by playing around with a simple idea – what is going on with the cost of the “mortgage” keyword, and what is going on with the traffic?  I haven’t figured out how to find the trend line for the cost of a keyword, but I can tell you that the average CPC for positions 1-3 is $5.73 – $8.60, for a max of 28,625 projected clicks.  You can get positions 4-6 for considerably cheaper: $0.55 – $0.83 worth a max of 1,894 projected clicks.  To be clear, that’s a difference of daily ad spend of $244,890 and $1,580.  I wish I knew what it cost to get in positions 1-3 in late December.

Mortgage TrendNow, things get a little bit more interesting when you use the Google Trends tool, which allows you to see how search terms have performed over a given period of time.  I started with the “mortgage” keyword because I knew it to be one of the more expensive, and one of the more clicked on from a paid ad perspective.  Take a look at that chart on the right.  Looks like searches have actually gone up over the last few months.  Now, one could argue that these are all desperate people looking to get out of a bad loan.  Possible.  One could further argue that there is no one willing to lend to these people.  Also possible.  Regardless of that truth, someone still paying for those clicks.  

Mortgage Trends By CityIf you look at the chart at the left, you can see that the cities that have well documented troubles with subprime are well represented here.  So the question remains, is GOOG’s business in trouble, or will there be some subset of words that actually drive more income for the company?  We all know that when financial troubles set in, people go looking for the get rich quick schemes and other magic pills.  Think of all the Ebay Power Seller guides that will get sold to people following the Dave Ramsey model of getting out of debt (note: I listen to Dave every day, and his advice is pretty solid, but he does like people to sell their stuff).

I wish I had access to a little more data to further explore this concept.  I throw this post out there in the hopes that someone smarter than myself, or with access to more information, takes a deeper look at this idea.  Bottom line, I am actually holding out on buying more GOOG because I don’t think we have bottomed.  If it touches 400, I am in, and backing up the truck.