Much has been writ­ten about Google’s cost per click (CPC) trends over the last year. While Adobe’s analy­sis has shown CPCs may have sta­bi­lized in Q1, there has been a tremen­dous amount of spec­u­la­tion on whether or not the down­ward trend of CPCs could be halted given the rise in traf­fic from mobile devices, which typ­i­cally fea­ture lower CPCs.

Tak­ing a step back, we’ve seen Google announce two major changes to the SEM mar­ket­place over the past year: The launch of paid Prod­uct List­ing Ads (PLAs) in the retail ver­ti­cal and Enhanced Cam­paigns.  So the ques­tion becomes, what impact does each of them have on Google CPCs and how are they being received by adver­tis­ers and consumers?

Although Adobe Media Opti­mizer with its $2 bil­lion in annu­al­ized ad spend was first to mar­ket with sup­port for Enhanced Cam­paigns, we haven’t yet seen wide­spread adop­tion of the new cam­paign for­mat so it’s too early to con­firm whether or not they will cause CPCs to rise and how they will impact adver­tiser per­for­mance over­all.  How­ever, as we’ve stated in a pre­vi­ous post, we expect that com­bin­ing tablet and desk­top traf­fic and allow­ing AdWords cus­tomers to bid on mobile and desktop/tablet traf­fic from the same cam­paign will increase CPCs over­all.  All adver­tis­ers will need to adopt the new Enhanced Cam­paign for­mat by July 22 so we’ll get a clearer pic­ture of how they per­form as that date approaches.

Clear Upward Trend for CPCs for PLAs

How­ever, with Prod­uct List­ing Ads, we’re see­ing a clear upward trend in CPCs dri­ven by strong adver­tiser and con­sumer adop­tion over­all.  This is good news for Google.

CPC Trends for PLAs vs. Text Ads

CPC Trends for PLAs vs. Text Ads

This is sig­nif­i­cant because PLAs are becom­ing a decent share of Google’s over­all search vol­ume.  In Europe, it is a lit­tle smaller than in the US, but PLAs have only recently launched there and we expect Europe to more closely resem­ble the US as we approach the 2013 hol­i­day season.

PLA Market Share of Google Search

PLA Mar­ket Share of Google Search

Retail­ers are show­ing a will­ing­ness to pay more for PLAs because they per­form well.  Part of the rea­son for the solid per­for­mance is the gran­u­lar level of tar­get­ing Google offers to adver­tis­ers.  Adver­tis­ers can tar­get cus­tomers at the prod­uct level (e.g. “sneak­ers”) or at the more gran­u­lar brand level (e.g. “Nike sneak­ers”). One of our Adobe Media Opti­mizer adver­tis­ers saw a whop­ping 40% increase in ROI after imple­ment­ing the more gran­u­lar tar­get­ing struc­ture illus­trated here:

Blog_3PLAs are a well-designed adver­tis­ing prod­uct from Google that adver­tis­ers are embracing.

Con­sumers are embrac­ing them too.  In fact, if you look at click-through rates (CTR) for PLAs they are per­form­ing bet­ter than text ads.

CTR Trends PLAs vs. Text Ads

CTR Trends PLAs vs. Text Ads

PLAs are nat­u­rally very sea­sonal given their retail focus, but CTRs are still out­per­form­ing text ads even after the hol­i­days.  CTRs peaked at 150% in the hol­i­day shop­ping month of Decem­ber, but have since sta­bi­lized between 120–130%, mean­ing cus­tomers on aver­age are get­ting 20–30% higher click-through rates on PLAs.

Blog_5

This makes sense because PLAs (on right, above) are, by def­i­n­i­tion, more visual than text ads (on left, above) so con­sumers are more likely to click on them.  But unlike ban­ner ads, which typ­i­cally see lower CTRs than stan­dard SEM text ads, PLAs still ben­e­fit from key­word tar­get­ing, where a user is essen­tially telling an adver­tiser what ad they want to see.  So con­sumers can get a highly visual, banner-like expe­ri­ence from a highly tar­geted key­word search.

In the two areas of SEM inno­va­tion Google has intro­duced – Enhanced Cam­paigns and PLAs – Google is doing very well on the PLA front. Once we see more wide­spread adop­tion of Enhanced Cam­paigns, we will update you on how Google is faring.

 

Method­ol­ogy

This analy­sis was com­pleted based on aggre­gate, anony­mous data from Adobe Media Opti­mizer search engine mar­ket­ing cus­tomers. The dataset rep­re­sents a sub­set of clients who have spend data for six con­secutive quar­ters or more whose result­ing SEM met­rics are then nor­mal­ized to aver­age indus­try cat­e­gory con­tri­bu­tions estab­lished by mul­ti­ple third-party data providers.

About Adobe Media Optimizer

Adobe Media Opti­mizer is the industry’s first fully inte­grated dig­i­tal adver­tis­ing plat­form that deliv­ers cross chan­nel ad man­age­ment and opti­miza­tion across search, dis­play and social media cam­paigns for peak return on invest­ment. The solu­tion deliv­ers more than 300 mil­lion monthly prospects and cus­tomers and is used by more than 400 global cus­tomers across indus­tries. Media Opti­mizer man­ages more than $2 bil­lion in annu­al­ized ad spend.

 

Bill Mungo­van is a direc­tor of prod­uct mar­ket­ing for Adobe Media Optimizer.

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