In 2011, Google's revenue topped $37.9 billion dollars. Of that total, 96% came from text and display advertising. Given the number of eggs in their paid search basket, it's no surprise that Google is to CPC as China is to the Renminbi. Market forces be damned, average cost-per-click will always operate within the Adwords economy in favor of Google's bottom line. There is, however, an art to Google's manipulation and it does not involve directly raising the price of ad clicks. AdWords is, after all, an open marketplace. Last summer Search engine round table reported a "42% increase in paid clicks over the second quarter of 2011" following the infamous Penguin update.
SEO's blamed the increased spend on lower placement in organic rankings following the update. Earlier last week Google introduced several changes to Adwords, proving yet again their ability to craft changes in the name of both their own revenue and that of their advertising constituents.
The Shift From Desktop to Mobile
More and more, searchers are replacing clicks with finger taps. Desktop to mobile web browsing belies an ominous shift in ad serving revenue that has left both Mountain View and Wall Street wondering how to make up the difference between mobile ads and their more lucrative desktop counterparts. At first, it appeared as if mobile ads might simply replace desktop ads and perhaps even lead to an increase in overall ad revenue (given the relative ease of which mobile devices penetrate the developing world). Alas, mobile ad revenue hasn't yet caught up to the desktop ad revenue of which it is ultimately replacing. In October, Mashable reported that "[Google's] paid clicks were up 33% year-over-year, but its cost per clicks declined 15% year-over-year." One reason for this is the difficulty in tracking ROI on mobile. For most users, the mobile web serves as a research and communication tool as opposed to a transactional tool. This lack of creditable transaction data—or conversions—makes it difficult to calculate the value of mobile ads in dollars. Thanks to multi-touch attribution modeling, that's changing. However, until advanced modeling goes mainstream, the last touch receives the bulk of the credit and thus the bulk of marketing spend. This attribution issue is the same experienced by social media marketers—how to demonstrate value to the c-level.
Adwords Enhanced Campaigns
Given their history of somewhat misleading default settings within Adwords, it was only a matter of time before Google's CPC problem was faced head on. Google, of course, has no desire to wait for everyone to learn the value of mobile advertising on their own; a volatile share price depends on it. Instead they have decided to leap frog the collective learning curve with a diplomatic blend of confusion and control. Welcome to AdWords "Enhanced" Campaigns.
Mobile Ads (are) Were Cheaper
Enhanced campaigns are lauded by Google as a move to help advertisers "manage [their] ad campaigns in today's multi-device world." While that sounds pleasant and should spread a larger share of ad impressions to mobile, it will unfortunately mix pricier desktop clicks with less expensive mobile clicks. The most glaring change in the Adwords refresh is that advertisers no longer have the ability to target mobile devices and desktops separately. This has several repercussions. For one, advertisers can no longer craft keyword lists specifically for mobile devices.
In the past, mobile advertisers might target short-tail search terms based on the shorter average search strings entered by smart phone users. That strategy is now less useful as it will be up to Google to decide which device triggers an ad. While Google has implemented a way to lower bids based on a percentage of a desktop bid, the process will be missed by the bulk of advertisers. This will lead Google to serve a higher percentage of ads on mobile screens, thus driving up their average cost per click. Additionally, Google is giving advertisers the ability to denote select ad content as "mobile preferred", but the final choice of whether or not to display content on mobile is up to Google. All of this has been sold by Google's own marketing team as a measure to improve the user experience and add efficiency. However, as many a digital marketer knows, most features that promote efficiency within the Adwords bubble can serve as inefficient budget drainers.
What Can Be Done?
Google is in the search business and thus wants to provide their users with the best search experience possible. Still, Google is a business and must continually look for ways to bolster their bottom line. This has always been the case and will always be unless Google is nationalized. After last month's DOJ verdict, that is unlikely.
The benefit of having someone experienced in online marketing is now more important than ever. As with every Adwords update, there is much that is useful, but just as much that serves to take control out of the advertiser's hands and put in Google's. With a thorough knowledge of the AdWords platform and experience running campaigns it's possible to stay ahead of Google and take advantage of their abundant and targeted marketing channel.
Do you have an opinion on Google's control over advertising settings? Let us know in the comments below or by tweeting at @BFMweb.