Latitude Brand Term Index - new update

July 16, 2008
by Simon Whittick

Google has changed its trademark policy in the UK: +869% of CPC increase? -700% of CTR? Forget what you’ve heard, here is the truth.
Latitude Brand Term Index has been monitoring the Cost Per Click (CPC) and the Click Through Rate (CTR) of Latitude’s clients’ brand terms over the last 2 months, since Google changed its trademark policy. The charts are right here, and don’t forget to read the analysis below.

Average CPC:

Average CTR:

16 July Update

Analysis

As we forecast last week, the CPC and CTR of both the previously fully protected and the previously partially protected terms appear to be converging.

For CTR, we’ve seen a gradual convergence over the past two weeks, and we can assume that, going forward even if there are some fluctuations, this trend will continue.

For CPC, it looks as if terms which were previously only partially protected have accelerated the convergence with fully protected terms. As a result, partially protected are now under the level they were before the policy change (-29%). And fully protected terms are still slowly raising (+16% than last week).

So, what does this all mean in practical terms? Because of the change in policy—which effectively puts both partially and fully protected brands on an even playing field— there may soon be little discernible CTR and CPC differences between fully protected terms and partially protected terms.

CPC will probably stabilize around an average £0.10 and CTR between 35% and 40%. In the medium term, we estimate this will result in about an average 130% increase in CPC overall and no additional movement for CTR.

What does this mean for you as an advertiser

There are several immediate implications:

- Advertisers need to evaluate the effectiveness of their non-brand strategy – are their generic keywords working effectively? The clever response from advertisers will be to reduce spend on generic search terms in order to allocate more budget for the rising cost of trademarked terms.

- On the flip-side, the policy change presents opportunities as well: it will now be possible to bid on competitor terms that were previously protected by the old trademark policy. Latitude anticipates that competitors’ brand terms will convert at around the same level as generic search terms, with marginally lower costs.

- Advertisers whose competitors have traditionally had robust protection of their trademarks will find a whole new selection of keywords will open up upon which advertisers may now place bids.

- The worst action an advertiser can take at this time is no action. Though trends show a convergence, your competition has been given an advantage and they are going to leverage it. You need to revise your PPC strategy in line with the demands of the current environment, to ensure your advertising budget to its best advantage

9 July update: So what are we seeing here?

Fully protected brands:

The fully protected brands (i.e. brands which had full Google trademark protection before May 5, i.e. no competitor ads would bid on them) have more than doubled their average CPC during the week that followed the trademark policy change on May 5, but have since stabilised (it’s now 150% higher than before the change). This increase is undoubtedly due to the new intense competition, as advertisers have seized the opportunity to bid on competitors’ brand terms to increase their visibility. Logically, as more advertisers now compete on any particular brand term, the CTR went down over the same period (from 45% to 35%), although it is now coming back up to the level observed before the change.

Partially protected brands:

The partially protected brands (i.e. brands which filed Google trademark protection but still had some competitor ads showing prior to May 5) have had an average CPC more volatile than for the fully protected brands, and it has recently fallen to a new low. We can assume that a part of the budget has been reallocated to bid on competitors’ fully protected brands, and as a result advertisers have decreased their bids in order to have the same amount of clicks. The partially protected brands’ CTR, which before the policy change was higher than fully protected brands’ CTR, has steadily decreased between May 5 and the start of July, reaching a similar value to fully protected brands’ (about 35%).

What for the future?

Fully protected and partially protected brands are now under the same rules. This is the reason why we’ve seen over the last 2 weeks a closure of the gap between both average CTRs (the same is slowly happening for the CPCs). The good news is the CTR is still at a high level (about 35%). The bad news is the CPC is still slowly increasing (brands have to increase it to maintain their position and their CTR…), and will probably continue to do so over the few next months, as ever more competitors arrive on this market. We will keep monitoring the trends and providing updates on Tuesdays, so keep tuning in!