Comment by ChuckMcM

Interesting results. I've remarked in the past how the decreasing CPC numbers were being papered over by creating massive amounts of inventory (more ads per page to click on) and paid click growth has largely been facilitated by adding distribution "partners" which is code in the search business that shove traffic your way. Early on in Google's history it was all organic but this last quarter they were spending nearly a billion dollars a quarter to have people send them traffic. Looking at the numbers for the last 12 quarters its like this:

          Paid Click deltas (%)     Traffic Spend 
             Y/Y Q   Prev Q        ($m)     y/y    q/q 
   Q1FY2010    15      5           265      --      --
   Q2FY2010    15      (3)         269      --      1.5
   Q3FY2010    16      4           285      --      6
   Q4FY2010    18      11          333      --      17

   Q1FY2011    18      4           337      27      1
   Q2FY2011    18      2           355      32      5
   Q3FY2011    28      13          383      34      8
   Q4FY2011    34      17          442      33      15

   Q1FY2012    39      7           468      39      6
   Q2FY2012    42      1           507      43      8
   Q3FY2012    33      6           556      45      10
   Q4FY2012    24      9           634      43      14

   Q1FY2013    20      3           680      45      7
   Q2FY2013    23      4           706      39      4
   Q3FY2013    26      8           755      36      7
   Q4FY2013    31      13          824      30      9

   Q1FY2014    26      (1)         845      24      3

Who would have thought between Microsoft and Google that sending search traffic artificially to a search engine would be a > $4B/year business? I don't think it is sustainable long term.