The Q3 2013 earnings call revealed that Google shares are at an all-time high – and yet, average cost per click (CPC) continues to fall.
With Google stock up, you’d expect CPC to be up as well. After all, something has to be driving the growth. So what gives?
Attention Shoppers: AdWords PPC Ads Are On Sale (Again!)
The trend is clear – cost per click on Google’s paid search ads continues to fall. The average CPC in Q3 was down 4% since last quarter and down 8% versus the same quarter last year. This is the 8th consecutive quarterly decline in average CPC since Q4 2011.
Our own internal customer data aligns nearly perfectly with the official earnings reports – we found average CPC to be down by 9% this year. And as you can see by the trend line, we don’t see things bottoming out any time soon, which we think is great news for advertisers.
Google Stock Up, AdWords CPC Down? What Gives?
How is it possible that Google’s stock trends continue to be positive while average cost per click on its AdWords advertisements – which have traditionally accounted for upwards of 90% of total revenues – continues to go down?
There are at least two things going on here. The first one is the big one: Overall ad impression and click volume are increasing. Paid clicks soared 26% year-over-year. And it’s increasing at such a rate that CPC’s can go down while revenues continue to grow.
This increased ad volume is largely due to Google crowding out the SERPs with sponsored ads, more aggressively than ever before.
Meanwhile, the decrease in cost per click is being driven by an increasing share of mobile clicks, where advertisers are unwilling to pay as much compared to advertising on desktop computers (on average, 1/3 as much).
A poll we took two months ago of 400 webinar participants showed that small businesses value desktop clicks over mobile clicks by a 10:1 margin:
This is nuts. Calls from mobile ads are actually worth way more than clicks to websites for many businesses:
- Mobile users are generally closer to the end of the funnel and have higher intent. They’re not just researching, they’re looking to make a purchase. For this reason we’ve found that mobile calls convert at a rate 3x higher than desktop ad clicks.
- A law firm client of ours found that mobile ads had higher positions and CTR but lower CPC, and the cost per conversion was 1/3 of the CPA on desktop.
The migration to Enhanced Campaigns led to an increase in the volume of total ad impressions, mostly through more mobile ads, because as ads are now eligible to show on mobile by default.
However, even though EC’s make mobile advertising much easier than before, advertisers still struggling to adopt mobile best practices. Fewer than 1 in 5 accounts have actually set up a mobile-preferred ad, as of last week (though this is up from 1 in 20 back at the beginning of the year).
This is unfortunate because you need to take advantage of user context in your mobile ads in order to be relevant to the location, device and time that a search originates from.
The other problem is measuring the ROI of mobile. Figuring out how to measure foot traffic to physical stores that results from mobile advertising, for example, is a tough nut to crack. Google knows this, and new features like cross-device tracking are meant to close the gap. It’s a nice effort but, like view-through conversions, the cross-device conversions are just estimates and aren’t accurate.
The Second Reason Google Shares Are Up: Non-Advertising Revenue Also Increasing
Also worth noting is the fact that Google’s advertising revenue is down to 91% of total revenues for the quarter. Google’s advertising business grew by 15%, but non-ads stuff like the cut of app purchases and movie rentals from Google Play actually grew 85%. So Google is growing slightly less dependent on ads for growth.
But don’t think that means Google won’t continue to do everything in its power to increase ad volume and ad clicks.
Get Your Mobile Ads Up NOW While They’re Still Cheap
The decline in mobile PPC costs is a huge opportunity precisely because so many people (wrongly) think there isn’t much opportunity here. They’re way overvaluing desktop traffic compared to mobile. Now is the time to grab more of those valuable mobile clicks and calls before other advertisers wise up.
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