The State of Mobile PPC: Past, Present, and Future [Data]
My fellow paid search advertisers, our world is always changing. It seems like we can’t go a month without a new ground-shaking announcement in this industry. Whether it’s policy changes, sitelink changes, changes to what impacts your Quality Score, new demographic targeting options – the paid search environment never sits still.
This is particularly true for advertisers who value the mobile market. The mobile landscape is growing and changing rapidly and it has real consequences for advertisers.
It’s not news that it seems like everyone has a smartphone these days. In 2013, smartphone users officially became the majority in the United States:
US Mobile Penetration
Source: Google: Our Mobile Planet
As these devices become better and more affordable, and their networks become more universally supportive – you can expect smartphone market penetration to continue to rise.
Mobile Search Volume
As the number of smartphone users grows and network support improves, you can expect that mobile search volume is also going to grow – as it has over the past few years:
Mobile vs. PC Local Search Volumes (BIA/Kelsey Forecast)
Source: BIA/ Kelsey
Experts are forecasting that mobile search volume will actually exceed desktop search volume as early as next year. This means that advertisers who are not catering to mobile users are soon going to be missing the lion’s share of the market.
A combination of increased mobile search volume and the forced migration to Enhanced Campaigns in mid-2013 has drawn more advertisers into the mobile PPC space. In the beginning of 2012, less than 2/3 of WordStream clients had a strong presence on mobile (defining “strong” as at least 10% of total budget). That population grew steadily until Enhanced Campaigns were announced in early 2013, after which that rate skyrocketed. In less than 6 months, the share of clients with a large mobile presence grew by 16%, from 73.2% in February 2013 to 84.4% at the end of July 2013.
After the forced migration to Enhanced Campaigns, the mobile competition has remained relatively steady. The last few months have seen some small growth in the level of competition on mobile and I’d expect that trend to continue to grow over time, albeit not at the same rate we saw in 2013.
Mobile Advertising Costs
As you’d expect, increased mobile competition means increased costs for individual advertisers. In fact, advertisers who have consistently been advertising on mobile since the beginning of 2012 have seen their CPCs increase by 150% – three times the increase that they’ve seen from desktop CPCs.
The forced migration to Enhanced Campaigns temporarily lowered the CPC for many mobile advertisers, but the last 12 months have seen rising mobile CPCs. While they are still comfortably below the costs of desktop and tablet, I would expect that gap to continue to decrease for now.
I wouldn’t expect mobile CPCs to pass desktop CPCs any time soon though. Although mobile CPCs are quickly rising and closing the gap with desktop, advertisers sill have control of their mobile bids and set them as a fraction of their desktop bids via a mobile bid adjustment. Overwhelmingly, advertisers set their mobile bids as a negative multiplier of their desktop bids. So long as that holds true, mobile CPCs can’t pass desktop CPCs. And ROI-driven advertisers can’t afford to overvalue mobile clicks over desktop clicks, given the current state of the mobile web.
Mobile Conversion Rates
The current state of mobile PPC is reliant upon the relatively poor conversion rates advertisers have grown to expect from mobile users over the years. Advertisers today can expect conversion rates 37% higher on desktop than what they’d expect on mobile.
There is some hope for mobile. Advertisers who have consistently been tracking mobile conversions since Jan 2012 saw mobile conversion rates make considerable gains in 2013, likely in part to the increasing popularity of call extensions. (Mobile call tracking could further close the gap.) Advertisers are still trying to figure out and prioritize the development of their mobile landing pages. Even if advertisers are seeing improvements in their mobile conversion rates, they’ve still got a long way to go to catch up to desktop.
The mobile PPC market has grown and changed a lot in the past year and I expect it to continue to grow and change in the next year. Even if conversion rates on mobile are lower than desktop conversion rates, the expanded reach and lower costs are enticing more and more advertisers to the space. The future for mobile is promising and I’d expect advertisers to continue to increase their spend there. Are you advertising on mobile? What kinds of changes and challenges do you expect for mobile in the next year?
Where not noted above, data is based on a sample size of 240 accounts (WordStream clients) representing US-based SMBs in all verticals. The report incorporates data from the Google Search Network between Jan 2012 and July 2014.