Archive for February 17th, 2008
Free AdWords Vouchers, What it costs to Google?
I recently got to hear that Google was giving away free AdWords vouchers of value $200 each to 61000 students to experiment and learn with AdWords, advertising for some interested Advertisers. $200 x 61000 = $12,200,000! Hmm!! that’s a pretty good amount. And that’s not all Google had been giving away vouchers worth $20-$100 for quite sometime. Doesn’t it cost to Google? May be not!! May be it is gaining from this free distribution.!!! Let’s see a few of many possible reasons.
Making AdWords Popular
Talk of Operating System and you will think of Windows! Windows is one of the most revenue generating software, is not the only fact that, contributes to its popularity, but also that it is also the first choice of people those who don’t pay for it (pirates!). The same seems to be working here for Google too! Google needs to popularize the product and it is this group, people who don’t feel like paying too much for advertisement, that it is trying to tap.
Actual cost incurred is Low
By giving away $200 voucher doesn’t make Google loose $200, but a very small fraction of it. The advertiser starts exhausting the voucher value as and when visitors click on Ads provided by Google. If the appearing Ad was on Google Search engine, Google looses nothing and if it was on AdSense partner site, Google pays an undisclosed fraction of the amount to the partner site which is a small fraction of the total $200 value.
Free Advertisers converting to Paying Advertisers
Advertising possibilities are limited for advertisers using Free vouchers… they cannot use more than one voucher for promoting a single site. So if they have exhausted a voucher and think that using AdWords did help in growing the business and that paying for it too will not be a loss, they surely will continue using it as a Paying customer. And here is where Google benefits!
Creating Competition to its own Advantage
Last but not the least, and may be the most important one! The amount that an advertiser has to pay for a click on its advertisement is the one that he had bid for. Higher you bid, higher are the chances for your Ads to appear and for low bids your competitor will overtake you. By giving away Free vouchers Google is creating Competitors against advertisers who are Loyal advertisers not using free vouchers. The competitors using free vouchers bid high for various reasons say
- They have nothing to loose if they bid high as Google is paying for it.
- These vouchers are valid for a fixed duration so these competitors bid high to get as many visitors as possible before validity expires.
So loyal advertisers end up paying higher than compared to what they would have paid when there was less and genuine competition.
