Google AdWords works by bidding for maximizing profits, where the advertisers take part in an auction of keywords for top ad placement. As top ad placement could lead to possible extra clicks. The minimum bid one can make is 5 cents. And as Larry Kim points out, “Google can make up to $50 per click. Despite a diversified product portfolio, advertising on Google sites accounts for the majority of its billions in annual revenue.”
A statement made by Google’s Chief Economist back in September 2009 can perhaps prove as a justification on Google’s part for warning its users about the cost implications, “Your incremental cost per click is how much extra you are paying, on average, for the extra clicks you are getting from your higher bid. When your value per click is higher than your incremental cost per click it makes sense to increase your bid. On the other hand, if your value per click is lower than your incremental cost per click, you probably want to decrease your bid.” I guess, you can’t blame Google solely for the revenue they generate as result of the price we end up paying. If you’ve evaluated bidding highly and $50 per click is going to profit you then its your decision. Google starts the bid at an affordable 5 cent, its your competitors you need to blame for hiking the bid price and not Google.
In addition to that, whilst these industries are ending up paying high sum for their CTC’s an important point to note is, these industries have a dedicated customer traffic inflow. So, these businesses in principle do not mind paying such high value sums. So, who’s to be blamed? Certainly, not Google.
With the increase in the competition, will mean added fight over key words. So, the future looks good for Google as key words will get increasingly more expensive.