Publication date 7/29/2016
Google’s aggregate cost-per-click numbers declined by one percent again from a disappointing first quarter, suggesting that other mobile components deserve credit for the 19 percent year-over-year increase in advertising revenue the search engine saw during the second quarter of 2016.
Cost-per-click numbers on Google Web sites were down two percent since Q1 and nine percent year-over-year, while paid clicks on its Web sites and aggregate paid clicks jumped by nine percent and seven percent this quarter, respectively. Google is attempting to place a bigger focus on mobile advertising while trying to drive CPC rates with its rollout of expanded text ads.
“I think expanded text ads are about as big as it gets – they essentially create both a real estate crunch in a mobile browser experience and increase the likelihood of ad engagement,” said Dave McIninch, chief revenue officer at Acquisio. “Those two things combined mean that Google will be able to move CPCs up over time as it ‘right sizes’ mobile CPCs (typically lower) to desktop levels and the search traffic moves cross-device.
“Google also announced changes to cross-device bid strategies, but essentially giving search marketers 50 percent more character room to play with in a mobile search ad environment is by far the biggest change.”
Overall revenue strength
Google’s revenue reached $21.5 billion in Q2, up six percent from the previous quarter. Network revenue clocked in at $3.7 billion, up one percent sequentially, reportedly due to the growth of programmatic, according to Ruth Porat, chief financial officer of Alphabet.
YouTube continues to grow from strength to strength, mainly driven by video advertising from Google’s TrueView platform.
However, mobile nabbed the most valuable player spot when it came to advertising revenue.
“The primary driver was the increased use of mobile search by consumers, benefited by our ongoing efforts to improve the search experience,” Ms. Porat said during the company’s second-quarter earnings call.
Google’s advertising revenue was up 19 percent year-over-year.
Mobile’s starring role
The search engine’s accelerated mobile pages project – or AMP – has experienced massive global momentum, per Google’s CEO Sundar Pichai, and sees a total of four million new pages published each week.
Meanwhile, the Google Photos application sees 200 million monthly users. Mr. Pichai also noted that the company’s new keyboard for iOS devices, Gboard, is off to a great start.
“The strength of the quarter is about mobile,” Mr. Pichai said during the earnings call. “It’s transformed the way that people consume information.
“Our investment in mobile underlines everything we do today.”
However, the company did not manage to raise fledgling CPC numbers from Q1.
While Google said that a primary driver of revenue in the first quarter was increased use of mobile search by consumers, its results revealed declining cost-per-click numbers, pointing to the growing pressure the company faces to diversify its revenue-generating offerings (see story).
Aggregate cost-per-click numbers fell by one percent this quarter, while CPCs on Google Web sites and Google Network Members’ Web sites fell by two percent each.
Evolving ad units
Google’s ad unit changes have made waves in the last few days, showcasing the company’s dedication to rolling out enticing advertising options to marketers.
Its expanded text ads are now live. ETAs enable advertisers to include longer, and in some cases, double headlines. Standard text ads will no longer be accepted come October 26.
“We all knew this was coming – it was simply a matter of when,” said Ross Andrew, CEO and chairman of Maropost. “Digital advertisers and marketers will now need to rethink their strategies to accommodate this change.
“The first being writing new ads; use the extra characters to say something new and interesting for your customers,” he said. “The second, include your most important messaging in the headlines.
“No one is a fan of clickbait, but everyone wants to know what they’re clicking on before they click. And lastly, write all your ads to speak to users on all devices. Cross-device is key here.”
Optimistically speaking, the ETA rollout may be the catalyst needed to help Google ramp up its CPC rates.
“Marketers in highly competitive verticals, like finance, retail and automotive, may see an increase in CPCs (in addition to the 20 percent lift in CTR that Google predicts) as competitors push to get their terms into higher ranks and work to test out the new format more thoroughly,” said Dave Ragals, global managing director of search for IgnitionOne. “In terms of creative benefits, marketers now have the opportunity to better align paid search creative with creative across other channels, allowing for a more unified cross-channel experience.
“The allowance of 50 percent more copy means marketers can provide more context surrounding their brand or product,” he said. “However, this opportunity for more robust promotional content and keyword insertion comes with a few challenges.
“For example, Google and Bing currently have different copy length limitations, and adding new expanded text ads to a Google account will create more media work. There is also the potential for longer ads to test poorly, depending on how consumers react to more copy versus less.”
AI and machine learning
Per Google’s Mr. Pichai, the company continues to invest heavily in artificial intelligence platforms. Google is already collaborating with leading Android developers on virtual reality products, and machine learning remains a huge focus for the future.
“Google announced Android Nougat, its newest version of Android, and new mobile messaging apps, but the biggest news at the Googleplex is Google’s widespread adoption of machine learning,” said Sean Cullen, executive vice president of product and technology at Fluent.
“So far, this cultural shift is surfacing as AdWords bidding improvements, data center optimizations using DeepMind, and computer-generated art through TensorFlow, but expect this trend to become part of Google’s DNA.”