Google Claims Less is More on Click-Throughs

Google isn’t evil and it isn’t being beaten down by the recession or fewer click-throughs on its ads. At least that’s the message CEO Eric Schmidt tried to convey during an interview with Maria Bartiromo that will air on CNBC after the close of markets today.

The grown-up Googler sat down with the Money Honey for a frank talk about Google’s most recent earnings, its plans to move into more enterprise applications, its hopes for monetizing YouTube, mobile phones — even its particpation in the 700MHz auction. Oh and how it’s still trying to avoid being evil.

The good news is that Google is still focused first and foremost on advertising, in particular on gaining as much share of that market as possible. The bad news is the click-throughs rates for search advertising in the U.S. are down, which prompted investors to shear some 40 percent off the firm’s market cap from the beginning of the year through mid-March, when numbers showing poor U.S. click through data surfaced. Schmidt argues that the lowered click-throughs will actually result in higher revenue because the quality of the ad viewer is higher — there is less casual clicking. He also points out that recessions drive advertisers to spend money on ad formats such as search because they can tell how effective those ads are.

Recessions do tend to drive advertisers toward measurable campaigns, and Google will likely benefit. However, the decreased click-through rates are something those not just Google’s investors are watching, but many in the startup community as well. Are consumers becoming more leery of search ads and tuning them out or are they really getting better at determining which ads are relevant to them, resulting in fewer, but higher-quality, clicks? The answer to that question could determine the success of many of the web-based consumer service providers hoping to make money on new ad formats — and on Google AdWords.