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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