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© 2011 WordStream, Inc.
When Google released their most recent 2011 Q4 earnings report on January 19th, investors were disappointed. The latest Google earnings release showed that the search giant failed to meet expectations, falling short of analyst predicted estimates.
Wall Street was taken aback – usually Google beats expectations with impressive quarterly reports that blow predictions out of the water. The Google earnings reports from Q1 in April, Q2 in July, and Q3 in October were fairly positive, and while this more recent earnings call is far from disastrous, many analysts predicted a more positive earnings report. The GOOG stock price fell 10% on the stock market after the release of the Q4 Google earnings report, demonstrating the general disappointment in Google’s 2011 earnings.
Analysts were especially curious as to why Google’s average CPC (cost-per-click) in its Google Ads advertising platform had decreased by 8%, resulting in Google making less revenue per click than in previous years. Analysts were so anxious to have this oddity explained that Google CEO Larry Page had to specifically ask for no more questions to be asked related to CPC after being bombarded during the subsequent company conference call.
Larry Page explained that foreign exchange was one major factor that affected CPC. Another factor was the numerous ad format changes that were introduced in Q3 and Q4. Those changes had a number of positive results, such as making Google ads easier to read. This in turn increased the number of clicks on advertisements in general, and more clicks mean lower costs for each click. While this might result in lower Google earnings, it means the Google Ads advertising systems are working successfully.
While the latest Google earnings call might have disappointed investors, there’s no reason to pity Google – they generated $37.9 billion, largely due to advertising, which continues to grow.
We decided to conduct our own Google earnings report and discover what are the top 10 industries contributing to Google’s earnings.
The biggest contributors to the GOOG earnings are the finance and insurance industries. They seem to have it the worst, paying as much as $43 per click for industry keywords. While these CPCs seem ridiculously high, the ultimate financial gain from even a single client in the finance and insurance industries often make it worth the pricey clicks.
We also discovered the largely unnoticed fact that Lowe’s alone spent an estimated over $59 million on Google Ads, making them Google’s best and favorite pay-per-click advertiser.
We obtained the data for this study by using WordStream’s trillion-keyword database, combined with data from the Google Keyword Tool, to determine the top 10 million most popular searches of 2011. We also used this information to discover the average CPC prices paid by advertisers bidding on these popular keywords.
Next we sorted these most popular keywords into industry lists, then used a model that weighed the relative percentages of each industry’s revenue to Google’s 2011 revenues (not including non-advertising revenues).
The top five advertisers in each industry and their estimated spend was obtained by using SpyFu.com’s data, and then applying our own categorization analysis.
Just about any kind of business can take advantage of the opportunities provided by Pay-Per-Click Marketing. We’ve written previously about what types of businesses find the most success with PPC, but really it’s a great option for all businesses.
We used data made available by Spyfu.com, and we organized the domain names into categories using our own proprietary keyword categorization algorithms.
Our previous study last year was an analysis of the most expensive keywords on Google. We looked at the most expensive 10,000 keywords and organized those keywords I categories based on what themes they had in common (such as “credit” keywords and “rehab” keywords). This study focused primarily on the questions, “What are the most expensive keywords on Google Ads in terms of cost per click?”
This new study focused on a different questions, “What industries spend the most on PPC advertising?” This study was much more in-depth than our previous one – for this study we took the top 10 million most popular keywords of 2011, found out their estimated CPCs, then weighted and categorized the data into different industries. Some of the results are different because certain industries (such as retail) spend a lot in aggregate, but don’t pay a lot for each individual keyword.
Many people are skeptical of how so many ads on Google are clicked. Some comments express confusion on how industries pay billions for PPC ads when many individuals purport that they themselves never click PPC ads, or don’t even see such ads.
We’ve discovered that oftentimes, people do not realize that they may be clicking PPC ads. Google continues to give increasingly more prime SERP real-estate to PPC ads. These ads are often so well camouflaged with natural results, that many users may not recognize the difference.
To calculate the example keyword CPCs, we used Google’s Keyword Tool and set the targeting options to US and English. Next we set the keyword match type to broad.
The resulting CPC was the estimated price for the top spot. If these CPCs look higher than what you are use to, you are probably targeting a different location, different language, different match types, or are not targeting the top spot. Cost-Per-Clicks for the top PPC spot can be significantly more expensive than CPCs for the second or third spots.
The top spenders in the Finance and Insurance category were:
The top spenders in the Retailers & General Merchandise category were:
The top spenders in the Travel & Tourism category were:
The highest ad spenders in the Jobs & Education category were:
The Finance and Insurance industry spent a total of $4.0 Billion on Google pay-per-click ads.
Retailers & General Merchandise industry spent a total of $2.8 Billion on pay-per-click ads.
The Travel and Tourism industry spent a total of $2.4 Billion on PPC advertising through Google Ads.
The Jobs & Education industry spent a total of $2.2 Billion on Google Ads ads.
The Home and Garden industry spent a total of $2.1 Billion on Google Ads advertising.
The Computer and Consumer Electronics industry spent a total amount of $2.0 Billion on Google Ads pay-per-click ads.
The Vehicles industry spent a total of $2.0 Billion on Google advertising.
The Internet and Telecommunications industry spent $1.7 Billion on Google ads.
The Business and Industrial industry spent $1.6 Billion on Google pay-per-click ads.
The Occasions and Gifts industry spent $1.2 Billion on PPC ads.
Google’s revenue sources also include: Larger Gmail storage subscriptions, enterprise level Google’s web analytics, Google Fiber, Google’s Motorola unit, Google Glass, Google Play (previously known as the Android Marketplace), and many other miscellaneous sources. However, the largest revenue generator for Google is still advertising which runs on top of their search engine and services.
Based on Google’s revenue sources, Google is mainly in the online advertising space business like Yahoo! but with the acquisition of Motorola, Google is also in the mobile phone business. There has been a lot of speculation on whether Google is transitioning from software to hardware in the same manner Apple has – and at WordStream we think it’s an eventuality.