The Great Russian PPC Sale: How Global Markets Affect Your CPC
In case you’ve been avoiding the news for the last few months, Russia is in financial trouble. Analysts are calling it the country’s gravest economic crisis since 1998 as the Russian Ruble is quickly devaluing against the relatively strong and stable American and European currencies.
The reasons for the collapse are varied and complicated. The Kremlin has been creating trouble for itself for a while, racking up an increasing deficit with high public spending (particularly on its military, although the Sochi Olympics deserves a mention), despite years of poor GDP growth. Western investors and the UN were pretty turned off by Putin’s aggressive moves in Crimea earlier this year, and Russia chose to go all-in on exporting natural gas when that market unexpectedly turned as OPEC lost its coordination with Saudi Arabia.
TL;DR: the situation is a bit of mess and it’s likely to get worse before it starts to get better in Russia.
People queue at an exchange office in front of electronic information board displaying currency exchange rates, in Moscow, 17 December 2014 (Picture: EPA/YURI KOCHETKOV)
But wait, what does any of this have to do with Paid Search? Well, everything. Let me explain…
Russia has always been a bit of a sore spot for Google. Last week, Google announced it would close its Moscow office in reaction to increased censorship and data collection concerns. Also, Russia is one of the few places in the world where Google is not the preferred search engine. Google, which controls roughly 75% of the world’s search share, accounts for only 25% of all Russian searches – dwarfed by the Russian search engine Yandex, which controls a commanding 60%. While Google had always struggled with users and politicians alike in Russia, they remain committed to the market.
Google does have a unique advantage in Russia, though. Yup, you guessed it – AdWords. Google has well over a million advertisers internationally, and Google Adwords is far more nimble than regional search engines like Yandex or Baidu when it comes to location targeting. An AdWords advertiser can target almost anywhere in the world – domestically or internationally – within the same account and pay with their local currency. This makes for an interesting game.
Consider the Russian market. Its currency has been struggling for months now and is rapidly devaluing against the US dollar:
The RUB has fallen 26% to the USD since Early October 2014. Source: Yahoo Finance
Meanwhile, in the US, advertisers still have the option to reach the Russian market on Google and have an advantage of our home currency. I analyzed 146 US accounts that were also targeting the Russian market, bringing USD into the AdWords auction, and saw that they were at an amazing advantage over their local Russian advertisers using the local RUB:
During the same period, American AdWords advertisers saw a similar 21.5% dive in their search CPC in Russian markets. All this was done (for the most part) without changing bids or sacrificing position. In fact, most advertisers in the sample saw both cheaper CPCs and better positions. The current financial situation in Russia helped US advertisers get the same, or even more clicks, at a discounted price.
What does that mean for you and your paid search account? Well, it's obviously crucial if you’re currently advertising in Russia. But if you aren’t, there’s still a lesson to be learned here. “Globalization” is more than just a square on my “Buzzword Bingo” board. The genius of the internet and of AdWords marketing is that it connects all of us. If you think that your customers aren’t international, then you’re likely right – because you’re not trying to reach them internationally, not because they aren’t looking for your product internationally.
Russia is a prime market for US advertisers right now because it’s getting cheaper by the day to outbid local competition. As you get ready and start planning your marketing campaigns for 2015, be sure to consider putting some budget aside to explore international markets - you may be surprised to find you have some advantages over your native competition.
Data is based on a sample size of 146 accounts (WordStream clients) representing US-based SMBs in all verticals. The report incorporates data from the Google Search Network between Oct 2014 and Dec 2014.