Google Enhanced Campaigns to Impact Google’s Ad Revenue; New Algorithms Crucial For Advertiser Success
Google Enhanced Campaigns is fundamentally changing the world of search advertising by grouping desktop and tablets and distinguishing them from smartphone and other mobile traffic. The new, unified device targeting functionality in Enhanced Campaigns no longer allows marketers to separately target mobile, desktop and tablet devices . Instead, desktop and tablet bids are forced to be the same and mobile bids are simply set as a percentage adjustment relative to desktop and tablet bids.
Do advertisers need to reconsider their search advertising strategy given these changes? The answer is yes, absolutely. We looked at the latest search marketing and cost-per-click (CPC) trends across nearly 100 major U.S. advertisers representing more than $100 million in ad spend from March through May 2013. Here are some of the findings:
Strong CPC Growth Expected with Google Enhanced Campaigns
With the introduction of Enhanced Campaigns, the historically lower CPCs for tablet campaigns should increase to reflect desktop CPCs. We’re only just beginning to see this trend materialize with a 3% increase in tablet CPCs with respect to desktop CPCs, along with a smaller 1% increase in mobile CPCs. These percentages will likely rise as advertisers continue migrating to Enhanced Campaigns until the July 22 deadline set by Google.
The overall CPC trends across all devices including desktops also show strong growth. Google CPCs increased more than 6% over the last three months alone — a significant jump. Although CPC increases typically occur in spring, especially in retail as marketers increase their ad spend for the summer months, seasonality can be ruled out as the sole driver for this trend. Enhanced Campaign migration is one contributing factor to overall CPC inflation.
One other trend we noticed is that CPCs on Google have stabilized. For the past two years, Google CPCs fell on a year-over-year (YoY) basis due to the increase in mobile and tablet traffic where CPCs were lower. However, for the first time in seven quarters, the CPCs on Google are flat YoY and we anticipate that CPCs will rise on a YoY basis again starting next quarter. We expect this trend to positively impact Google’s ad revenue.
Google Mobile Bid Adjustments (MBAs) vs. Adobe MBAs
Due to increasing CPCs, marketers must ensure proper migration to Enhanced Campaigns in order for their campaigns to effectively and efficiently perform. Properly set and managed MBAs, which determine bids on mobile devices relative to bids on desktops/laptops and tablets, are critical to a successful transition. With Enhanced Campaigns, MBAs control how much mobile ad spend is allocated versus desktops/laptops and tablets – therefore, it is imperative for MBAs to be set precisely so return-on-ad-spend (ROAS)/ROI is maximized across all devices.
Google’s MBA suggestions are based on how “similar advertisers” bid on mobile compared to other devices, but we have found that these numbers typically don’t reflect the performance of individual campaigns and ad groups. The mobile bid suggestions are not tailored to an advertiser and the performance of a specific campaign. When comparing the distribution of Adobe MBA recommendations versus Google MBA suggestions for several advertisers, we found that Google MBA suggestions only take on a few values. More than 90% of all Google MBAs were either –20% or 0%, which is less than optimal and leaves other values remaining (see chart below).
ROI across desktop, tablets and mobile devices should be accounted for when optimizing campaigns for efficiency. If the desktop ROI is much better than mobile, or vice-versa, then it suggests that there is room to further adjust the MBAs and traffic ratio between devices to achieve higher overall efficiency. Looking at a sample of four major campaigns in the U.S., the chart below shows that Adobe MBAs on average achieve an ROI ratio between mobile and desktop/tablet much closer to 100% than Google’s MBAs. Using Google’s MBAs, mobile ROI is lower on average than desktop/tablet, which suggests that Google’s MBA recommendations tend to be too high and mobile bids should be lowered further.
Through Adobe Media Optimizer, Adobe was the first advertising platform provider to support Google Enhanced Campaigns and today we are excited to announce the algorithm update in Adobe Media Optimizer to ensure maximum ROI for ad campaigns and highly effective MBAs. Unlike Google MBA suggestions, algorithm recommendations in Media Optimizer are based on actual conversion and engagement data specific to each campaigns. For more information on how Adobe leverages the power of rich analytics data married with advanced algorithmic bidding, see our recent post here.
1. Algorithms become more important. Search marketing is getting increasingly complex – and it is becoming increasingly difficult to use a manual approach to get the best possible performance from a relatively simple campaign. Not only are there GEO specific targeting options available, there are also device-level and time-of-day/day-of-week options to consider. While MBAs are Google’s attempt to simplify this for marketers, they also complicate matters for the advertiser. Not only does one have to consider the bid, but also the mobile adjustment factor to get the most out of a search campaign. This only increases the need for automated algorithmic bidding platforms that resolve the complexities to manage such programs.
2. CPCs on Google will continue to increase this quarter to end positive or flat YoY for the first time in almost two years. The Enhanced Campaigns transition will drive competitive pressure on tablet devices through June and July, and the full effect of this change on the market will happen in Q3. We anticipate CPCs will rise by 5-10% on a YoY basis in the next two quarters. This increase is partially attributable to Enhanced Campaigns, the other factors being the competitive landscape among advertisers and macro-economic conditions.
3. Spending on Google will increase by 15–20% YoY. We have seen a 15% YoY increase in ad spend despite a fall in CPCs (i.e. all the increases were volume-driven). As CPCs increase due to the Enhanced Campaign migration, we can expect the spend levels on Google to further increase beyond the current 15% YoY growth. In other words, we expect 15-20% growth in spend on Google due to 10–15% increase in traffic growth and the remainder from the increase in CPCs.
4. Tablet optimized sites become even more important. Tablet search campaigns have enjoyed significantly higher ROI than equivalent desktop campaigns due to two reasons: a) They convert just as well if not better than desktops. b) They enjoy lower CPCs due to lower competition. As the CPC advantage disappears, marketers have to focus on better user experiences to increase the conversion rate on tablets to drive ROI.
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.