This week Google launched their Conversion Optimizer, an AdWords tool that enables you to set a cost per action (CPA) goal and let Google bid your keywords against that goal.

Of course, whenever Google launches any new product or feature, it’s going to get lots of press, and this launch is no exception. What Google observers have also learned over the years, however, is that whenever Google launches a product, there’s a reasonably good chance that it will be a dud and quietly fade away over time.

So that’s the question I have regarding Conversion Optimizer. Is this a game-changing addition to AdWords, like AdSense or Desktop Editor, or is this going to end up in the “Where are they now” category, like Google Print Ads or CPM Site-Targeting?

Conversion Optimizer Will Eventually be Good, But Not Yet

My guess is that this one is going to be a winner, but it’s going to take many iterations to before it can take a victory lap. Why? For starters, the word on the street about Conversion Optimizer has been mixed at best so far. Andrew Goodman of Traffick tested it out and didn’t see the value add: “we got worse results with the optimizer “on” than we did with it “off” compared with the same days a week before, and immediately preceding days.” Others, like Jeremy at PPCDiscussions are still in the process of testing it out, but fear the worst (or at least, fear mediocrity).

I have no doubt that both Andrew and Jeremy are spot on in their analysis. Google tends to release tools early (perhaps intentionally) and then uses the massive free feedback from the masses to refine their work in subsequent iterations. So my advice is to tread very cautiously at the moment with this tool – wait until V1.2 comes out in three months and then start playing with it.

What’s interesting about this release – and why I think it will end up being a success – is that it is consistent with Google’s (relatively new) overall strategy of providing transparency and quality. As I have noted before, Google has launched a lot of tools and features recently to help advertisers understand and profit from Google traffic. Examples include Google Analytics, IP-filtering for AdSense, Website Optimizer, and day-parting and geo-targeting functionality. Google believes it has the best traffic, so it’s doing everything it can to flaunt that fact. So I think this launch will get the resources necessary to succeed.

Google Hates Middlemen

Combine Google Analytics, Website Optimizer, AdWords Editor, and Conversion Optimizer and you are getting pretty close to a full-service bid management technology application. This also resonates well with another Google mantra: cut out the middleman. Google tends to dislike anyone that comes between the company and it’s advertisers.

We’ve already seen how Google has reacted to advertising middlemen (via quality score penalties against affiliates), shopping middlemen (quality score penalties against comparison shopping engines), web development middlemen (Google Page Creator) analytics middlemen (Google Analytics), and testing middlemen (Google Web Site Optimizer), so it really comes as no surprise that Google would be working on cutting out the bid management middlemen (Conversion Optimizer and AdWords Editor).

And to be clear, each of these middlemen represent billion dollar markets. Google may be offering these services for free today, but I gotta believe that the long-term goal is not exclusively altruistic.

The Google Philosophy: Average Free Products are Better than Awesome Expensive Products

Now I know that my friends in the bid management world (that means you, SearchQuant!) will be writing comments on this post basically stating the following: Conversion Optimizer, or any of the other free tools Google offers pale in comparison to the breadth and sophistication of the for-pay features that are offered by the existing players. Hence, you can use the free services from Google, but you risk diminished performance as a result.

This, undoubtedly, is true, but I don’t think this is a very good long-term argument for these providers. First, Google will get better. We’ve seen this in Google Analytics, where the product has really improved rapidly in less than a few years. I doubt Google will pass the true Web analytics providers anytime soon, but they have and will continue to narrow the gap.

And this brings up point #2: as the gap narrows, the economic benefits of a for-pay service begin to diminish considerably. If a company has to choose between an awesome $100,000 annual investment and a terrible free investment, most companies will probably suck it up and pay the 1oo grand. But when the decision is between an awesome $100K investment and a pretty good free one, the choice becomes a lot tougher.

I often sit in vendor meetings where the vendor shows me all the absolutely incredible things his tool can do. It’s easy to get caught up in the bells and whistles and imagine yourself using all these features every day and making billions of dollars for your company. But after purchasing some of these awesome tools over the last few years, and using perhaps 5% of the functionality, I’ve realized an important point: you don’t need a Ferrari if all you are doing is driving to the supermarket.

And that to me sums up a lot of Google tools. They are station wagons compared to sports cars, but most companies simply don’t need the performance of a Ferrari. Over time, as Google upgrades from the beater station wagon to a decent Hyundai sedan, I think their free tools are going to gain a lot of traction at the expense of the paid options. Once the paid competition is gone, it will be interesting to see how Google uses it’s middleman position to it’s advantage.

1 Comment

  1. Tayten April 13th, 2011

    IMHO you’ve got the right awensr!

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David Rodnitzky
David Rodnitzky is founder and CEO of 3Q Digital (formerly PPC Associates), a position he has held since the Company's inception in 2008. Prior to 3Q Digital, he held senior marketing roles at several Internet companies, including (2000-2001), FindLaw (2001-2004), Adteractive (2004-2006), and Mercantila (2007-2008). David currently serves on advisory boards for several companies, including Marin Software, MediaBoost, Mediacause, and a stealth travel start-up. David is a regular speaker at major digital marketing conferences and has contributed to numerous influential publications, including Venture Capital Journal, CNN Radio, Newsweek, Advertising Age, and NPR's Marketplace. David has a B.A. with honors from the University of Chicago and a J.D. with honors from the University of Iowa. In his spare time, David enjoys salmon fishing, hiking, spending time with his family, and watching the Iowa Hawkeyes, not necessarily in that order.