Google increasing revenue by showing fewer ads?

Robert Scoble blogs about Google showing fewer ads per page. It’s speculation based on a conversation with a Google employee. He gives a couple of possible examples and mentions Google research that people trust advertising more when there are fewer ads. Li Evans covers the story saying that it’s one that every online marketer should pay attention to as it will affect their budgets.

It’s certainly true that Google doesn’t display all ads. The blurb on the adwords home page says:

“When people search on Google using one of your keywords, your ad may appear next to the search results”. (The bold is mine)

The most common reasons why an ad doesn’t show are:

1. The daily budget for the campaign isn’t high enough to cover all possible impressions
2. The quality score is low resulting in the keyword being inactive because the bid is less than the minimum bid required
3. The quality score is low so the ads aren’t showing for broad matches. From Google’s help file: “A keyword’s eligibility for broad match variations is evaluated continuously based on its performance, so if the keyword performs poorly, it will be eligible for fewer variations. Conversely, if it performs well, it will be eligible for more.”

So, in addition to these scenarios, is Google also moving towards limiting the number of ads displayed in total?

In the example Robert Scoble gives, for the search “San Francisco Sushi”, he points to the fact that there are only 5 ads in total and that the Google employee claims there used to be more. Well it may be the case that advertisers have dropped out due to the quality score changes racking up their minimum bids to a level that makes it unprofitable for them to participate. Li Evans appears to be drawing the conclusion that Google is capping the total number of ads with her question “what happens to all those other advertisers that used to be in positions 4 on out to 100 (or however high they go)? “

I can’t see any logical explanation for reducing the total number of ads however maybe there’ll be a reduction in the number of ads per page. Currently up to 11 ads can show on page one, 3 in the blue box and 8 down the right hand side. Maybe some of these ads will get pushed off the first page and on to subsequent pages.

I’m assuming this would result in an increase in keyword costs as (generally) preferred positions are on page one and also above the “fold”. A reduction in the space for paid ads on the first page would increase the value of those spots and drive up the costs for advertisers.

I haven’t seen any changes in campaigns I manage in Australia but it’s interesting speculation nevertheless.