Are Fewer Clicks A Sign of Trouble for Google?

Last Updated Mar 28, 2008 10:04 AM EDT

There's much speculation today about the significance of the fact that the number of U.S. Internet users clocking on Google's search ads in February fell 3 percent from January. It was the second straight month that had happened.

Google says the deceleration in clicks is occurring because of its efforts to improve the quality of its advertising leads. For example, it has made it harder to accidentally click on an ad.

Other commentators are suggesting that the slowing U.S. economy is accounting for the reduced traffic.

But I suspect another factor is in play--people are fatigued by Internet ads. They are going out of fashion. It appears that on the Internet, fashion cycles come and go faster than they do in the bricks and mortar world. Major advertisers have poured billions into Internet advertising because they just love to be able to measure the clicks and get some sense of their return on investment (ROI) on their advertising dollars. But do consumers have a deep and ongoing commitment to this form of advertising? I suspect not.

If I'm even halfway right, Google has a major challenge on its hands because its search ads are the source of nearly all its revenue. This is a classic trap--Google's executives are incredibly arrogant at the moment and probably cannot even contemplate this possibility. It's too disruptive. (They like to disrupt; they just don't like to be disrupted.) So they'll miss the shifting signals in the marketplace. Within six months to a year, we could be hearing about "Google's crisis." But the signals are there today.

What's your view?