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Google released its Q3 earnings a while back amidst a flurry of press attention. There has since been a lot of negativity surrounding the news; presumably this is not just because of the accidental early announcement bang in the middle of the trading day, but also because the leaked press release was a draft rather than a finished version. According to Google’s figures dating from the third quarter of 2011 to the second quarter of 2012, the average cost-per-click (CPC) is decreasing.
“Average cost-per-click, which includes clicks related to ads served on Google sites and the sites of our network members, decreased by approximately 15% in the third quarter of 2011 and by approximately 3% in the second quarter of 2012.”
It is worth bearing in mind, however, that the average CPC that Google refers to is for all countries and includes both search and display, which cannot be split down into UK specific data. Interestingly, Latitude’s search specific data has seen a different trend within the UK market.
Reviewing data from both 2011 and 2012, we can see that our CPCs are higher and increasing steadily this year. In Q3 specifically, there has been a further increase and we can split out this data by device to analyse it further:
Desktops vs. tablets
Desktop computers have historically had the highest average CPCs but in Q3 2012 there was a dramatic jump for tablet with the average CPC just 1p lower than desktop. Looking into this further for September alone, tablet CPCs are actually higher than desktop CPCs.
Google vs. Facebook
Referring back to Google, their investors are stating that mobile is responsible for the drop in average CPCs. Mobile traffic for Google is largely incremental, not like Facebook where mobile traffic is cannibalising desktop traffic.
Dropping CPCs vs. growing number of clicks
Another important question is what does it actually matter if CPCs are on the decline if the number of clicks is growing at a faster rate? Google state that “aggregate paid clicks increased approximately 33% over the third quarter of 2011 and 6% over the second quarter of 2012”.
Brand CPCs vs. CTRs
Another viewpoint to consider is whether brand CPCs are on the decline because of the continued increases in click-through rates on brand terms due to ad extensions.
Taking into account these factors, advertisers need to beware of the trends that are developing to position their strategy accordingly. Rising tablet CPCs suggests a growing importance of tablet users as advertisers bid up to compete for click share. If advertisers wish to avoid rising CPCs, the incremental traffic from mobile devices must be part and parcel of any strategy, especially as Google is effectively rewarding mobile optimised landing pages with better quality scores. It may only be a matter of time before they start penalising non-optimised mobile websites.
Overall, Google’s top level CPCs may be falling, but click volumes are rising, which means more revenue for Google. Mobile and tablet devices are also the two fastest growing devices in terms of PPC click volume, meaning even more revenue for Google. Therefore even as Google CPCs are falling and market analysts predict doom and gloom, their click volumes are rocketing and future revenue for Google is, in fact, looking good.
UK’s paid search market is maturing at speed. Advertisers should therefore consider investing in other channels alongside PPC, which should include Facebook, Display and Affiliate as well as their mobile offering.
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