Screwgle™ - Google's new ad revenue model

It's wallet-emptying good...

Google's strict code of secrecy calls for extra silence when the subject is AdWords, the epic money-making machine fueling the company's drive towards world domination. But sometimes, the truth slips out.

Earlier this month, during Google's all-important quarterly earnings call, a financial analyst outed the company's plans to squeeze who knows how many extra dollars from the world's online advertisers. Though no one seems to have noticed, this astute money man mentioned "Automatic Matching."

"Automatic Matching" is an AdWords beta program that Google launched ever so quietly at the end of February. Via email, the search giant notified an unknown number of advertisers that if they ever failed to spend their daily ad budget, this new feature would automatically spend it for them.

With AdWords, you arrange for your very own text ads to appear in response to Google keyword searches. The program is billed as an auction. You bid for a particular term or collection of terms - "chia pet," say, or "suppositories" - and if you bid high enough, your ad will turn up each time a web surfer searches on those words. And each time someone clicks on your ad, you pay Google a fee somewhere beneath your bid - until you reach your daily budget.

Of course, if a relatively small number of surfers search on your keywords, you won't reach your daily budget. And that's where Automatic Matching kicks in. When Auto Match is turned on - and it was turned on by default with many (if not all) beta-testers - AdWords automatically spends your unused budget on keyword searches you aren't actually bidding on.

"Automatic Matching automatically extends your campaign's reach by using surplus budget to serve your ads on relevant search queries that are not already triggered by your keyword lists," reads Google's email to beta testers. "For example, if you sold Adidas shoes on your website, Automatic Matching would automatically crawl your landing page and target your campaigns to queries such as 'shoes,' 'adidas,' 'athletic,' etc., and less obvious ones such as 'slippers' that our system has determined will benefit you and likely lead to a conversion on your site."

Naturally, this boosts Google's bottom line. But as search marketing consultant Dan Theis has pointed out, it doesn't exactly benefit the average advertiser.

"They're offering you the exciting opportunity to bleed every penny of your budget every day, advertising against keywords that you didn't want to bid on," Theis says, before unloading the sarcasm. "Sure, if I sell Adidas shoes, why wouldn't I want to get some traffic from people who searched for slippers? I mean, it's not like I'm trying to turn a profit or anything, right?"

Well, midway through that Google earnings call, Bank of America analyst Brian Pitts popped up to ask about the progress of Auto Match - which Google has yet to publicly acknowledge with anything more than some extra words on its AdWords help pages.

"You expanded Auto Match to more advertisers this quarter. Do you see this as a significant driver of coverage going forward?" Pitts asked, referring to the number of Google results pages that include ads. If more pages include ads, then Google gets more paid clicks. And more paid clicks mean more revenue.

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