Summary
This is a good reminder that buying advertising from Google is like betting against the house and that barriers to entry for competitors like Microsoft and Yahoo! continue to rise. Google has great supply - but how much demand is in the market is the question.
Analysis
A couple of quotes from this article are useful to remind us of what the dynamics are when buying from the Google ad machine:"The price of search advertisments is determined by an auction-based system where advertisers bid against each other to have their ads displayed more prominently." This raises the real queston, when a company buys ads from Google are they really bidding against other advertisers? Or are they bidding against Google? Remember, Google's job is to increase the pay per click that they receive. Who says they can't raise the price even if another advertiser isn't in the bidding.
"There are some 'verticals' where we might be hitting limits, and there are plenty of verticals where we're not - but in aggregate there's still plenty of room." said Eric Schmidt. "He also specified that there were hundreds of thousands of vertical advertising categories in Google's systems factoring in such things as types of advertisers and regions."
Trying to recreate hundreds of thousands of vertical advertising campaigns with appropriate and accurate measurement tools that meet the satisfaction of marketers is a task that will continually evolve, incrementally improve and constantly raise the barriers to entry. All companies that want to compete with Google in delivering up ads, whether in search, display, radio, newspaper or on-demand video must have a comprable solution or they cannot compete with the Google ad machine.
In essence, the real question behind Google's continued growth isn't a question of supply - they have ample supply and know where to get plenty more. It is clearly a question of demand. How much demand is in the market and at what point does Google reach saturation or obtain so much market share that their growth becomes limited and is constrained?
On the search side, the 3rd link is a key indicator and should be watched closely. Knowing that the 3rd link is empty will give everyone a consistent measure as to how much demand is in the market.
