For the past few days I've been trawling my way through global Internet reports, advertising reports and through the last five years of Google annual reports. In fact, I think that I'm nearly reported out.

After reviewing the recent Google quarterly report it can clearly be derived that Google is continuing to adopt a very aggressive strategy of cutting off Internet traffic from competitors. Since the beginning of 2006 Google has been progressively reducing its network traffic margins from a high of 22.1% (Q1 ‘06) to low of 11.9% (Q1 '08).

During this same period Google has reduced the advertising margin on its own sites from 40.8% to 39%. Although 1.8% doesn't sound like much when you're dealing with a revenue line of $5.09 billion for last quarter then that 1.8% becomes $91.5 million which is more than the annual revenue line of most domain parking companies.

By constantly squeezing the competitors out of the traffic market Google is continuing to shore up traffic for the burgeoning online advertising boom. Presently the entire Internet advertising market in the U.S. represents just 7.7% of the entire advertising spend. Television (cable, network and local) is still taking 65.9% of the U.S. domestic advertising dollar. Traffic is eyeballs and it's clear that Google wants a slice of that television pie by securing greater and greater numbers of eyeballs for their advertisers.

So why has Google changed its strategy over the last couple of years and where is it getting its new traffic from? The reason for this is that the current Google model of auctioning advertising space is reaching a natural maximum price per click for market vertical after market vertical.

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