Google Q2 Earnings Show CPC Down 6% Year over Year: Where's the Growth Coming From?
Google’s latest earnings call was a bit mixed – while Google saw a 22% increase in revenue over last year, bringing earnings to $15.96 billion in the second quarter of 2014, and the search giant narrowly beat analyst projections of $15.6 billion in revenue, their ad sales in the US and the UK, their two major markets, have slowed. Non-US revenue (excluding the UK) of $7.7 billion accounted for 48% of total revenue. Their earnings per share were considered a miss as well, at $6.08.
The proliferation of ads in emerging markets worldwide drove profits to $3.42 billion for the period, up from $3.23 billion in Q2 2013. More people are clicking on Google ads – a lot more. Total paid ad clicks were up 25% over last year and up 2% over the first quarter of 2014.
However, the average cost per click is falling; CPC is down 6% from the same period last year (click graph to enlarge).
This is a continuation of a two-year trend – if you’ll remember, most of the PPC industry believed Enhanced Campaigns would drive up average cost per click, but that hasn’t panned out.
The fact that CPC’s continue to fall is great news for advertisers! But is it good news for Google? They’re showing impressive growth, but it’s still an earnings miss, so you can bet that they’re going to continue aggressive monetization of the SERP:
- Sponsored results, AKA paid search ads, no longer have a colored background, but rather a small label. When ads are less obviously ads, they can take up more of the SERP without users noticing. Again, this is actually beneficial for advertisers – good for you if they think your ad is a natural result.
- The recent deletion of authorship photos from the SERP, followed closely by the loss of video snippets might point to a larger trend: Is Google going to remove all visual elements from the organic results, so that only the paid ads have eye-grabbing images? If so, that sucks for SEOs.
That yellow background stood out more than the yellow label, wouldn't you say?
Since greater mobile adoption and increased penetration into international markets are continuing to drive average CPC down, Google has no choice but to look for growth in increased overall impressions and clicks. You know what that means: more ads everywhere.