The Google paid search marketing juggernaut continued, driving $4.23 billion in revenue in the third quarter. Since this money is supposed to be earned delivering performance-based results for advertisers, it’s funny that they don’t simultaneously report on increases in click-through-rates, conversions, ROAS or better yet revenue or ROI for advertisers. (Obviously they don’t have any or all of this information for most advertisers, but via Google Conversion Tracker and Google Analytics they should know enough to provide visibility and insight.)

In an interesting analysis earlier this week, Kevin Kelly pointed out that Google makes on average $0.27 for each and every search yet their expenses-per-search are only $0.0028, giving them an ROI of over 10,000%. (Note that Kevin clearly disclaims the approximate nature of his numbers which are based on simple calculations from the publicly available numbers. He also wrote an interesting follow up post)

I’d add to his numbers that since only about 1 in 5 searches is reported to result in a paid click, that means Google is earning about $1.35 per PPC click, although that sounds extremely high, but maybe not.

My favorite line in Kevin’s story is this from ‘a Google insider’:

“Since the advertisers are paying for the ads, they must find that search gives them additional profit. Since customers are clicking on the search-based ads, they must get additional value.”

I think I’d reword it this way:

“Since the advertisers are paying for the ads, they must hope that search gives them additional profit. Since customers are clicking on the search-based ads, they must not mind free access to potentially useful information.”

Historically the growing revenue and profits at Google have been taken as proof of the growing power and success of paid search marketing. At some point Google’s growing profit needs to start being thought of as proof that a lot of advertisers are bidding irrationally and/or managing their campaigns really poorly and/or completely lacking in tools to adequately understand the economics of their activities.

Don’t believe it? Then riddle me this: if Google were driving an equivalent (or even proportional) revenue increase for all their advertisers wouldn’t the stock price of these advertisers, adjusted for their industry segment, be going up as fast as Google’s?