SEOmoz Gets It Right, But Also Gets It Wrong

To begin, let me say that, while I have been posting, I have gotten busy and fallen behind on my reading. So my posts have not been much more than, "hey, look at this article." I haven't had much to say that's been my own.

However, today, I've got to say something about this article over at SEOmoz. I'll try to keep it short...

SEOmoz | The Economic Motive Behind Google's New Advertisement Algorithm

This article is of great interest to me, since I was once an Econ major in school. Rand gets the overall idea right by saying that demand has shifted solely because of Google's change in its ad formula. However, his graph is wrong.



He says that demand moves to the right, and he is correct.
However, this is what the graph ought to look like:



Supply does not change - it is the same no matter what demand is. In Rand's graph, supply has actually increased with the new demand, which would mean that there would be more advertising slots to sell than there were before. But in actuality, the supply of ad spots - or Impressions - did not change. There are still just 3 top spots - same as before - and 10 to 12 spots on each SERP.

Most people want to at least be on the first SERP, so that would mean that on each serch, there will also be only 3 top spots at the most, plus an additional 9 or 10 spots - a maximum total of 13. That will never change, unless Google overhauls its format.

So, supply is vertical. It never changes, which means that small changes in demand will significantly affect the price, as we will see here.