surpassed Microsoft to become the second largest technology company in the US and their Cost-Per-Click figures have previously been on the increase. However, the last four quarters have seen their CPC decrease quarter after quarter, and this last release revealed it had fallen by 15%. Not only that, but their overall net income has reportedly dropped 20% as well. So what is prompting this demise in profits for the search engine giant? Many industry officials are suggesting this is Google reaching its peak, due to the fact that it has previously been firmly rooted in the desktop market and its attempts at moving into mobile are not proving so successful.
Google have admitted themselves that the average cost-per-click on mobile devices is lower than on desktop, and as an online marketing agency that manages PPC campaigns for a variety of clients, at The Search Agency we see first hand this discrepancy.
So what do we think is causing this difference?
We consider there to be a number of answers to this. Firstly, although users are rapidly abandoning their PCs altogether for their tablet and mobile devices, advertisers are not following suit quick enough, with either no mobile sites or mobile sites that don’t produce the same conversion rate. Therefore, at the moment, there is still less competition for mobile PPC than desktop, so CPCs can run at a lower rate than they would for a traditional desktop campaign. Furthermore, it is sometimes the case that mobile PPC’s early adopters are savvier so can negotiate lower prices in this newer and less populated field.
However, it could also be argued that Google is currently using low CPCs as a carrot in order to encourage advertisers to close the gap with the user, and are supporting this through campaigns such as GoMo – they even tell advertisers directly that 84% of smartphone users notice mobile ads. Ultimately, Google could artificially increase mobile CPCs tomorrow through a number of means if it wanted but in terms of long term health they are making sure the market is seeing good enough mobile ROI for demand to increase and CPCs to rise naturally. If this is the case, they may need to adjust their strategy as advertisers are not biting at the carrot fast enough.
Another factor could be the shift of searching patterns that comes with the progression of, particularly mobile, technology. As a search marketing company we are very familiar with the idea that searching is no longer restricted to search engines – it is no longer search engine optimisation, but search everywhere optimisation.
The rise of apps, propelled by Apple and the iPhone, means many users are turning to app search rather than heading to Google’s search box. Could this be why CPCs on mobile are considerably lower than on desktop? Because mobile users are staying clear of the conventional search route and finding new ways to search for what they are after? Google’s GoMo campaign actually offers some figures which show that app ads are catching up on search engine ads in terms of their visibility to the user:
The fall in net income at Google is also being attributed to the under performance of the Motorola Mobility division which reported a $527 million operating loss. This is the first quarter in which revenues from Motorola Mobility have been consolidated and the figures have alarmed investors. Google had already started to address the costs of acquiring Motorola by announcing in August their plans to cut 4,000 jobs but there appears to be a long way to go before the acquisition of Motorola shows its value.
So is mobile going to be the mountain that Google can’t climb? If Google’s past is anything to go by, probably not. The progress may be slow at the moment, but we expect that as site owners adapt to mobile, the difference in mobile and desktop CPCs are going to converge.
There may in fact be more variance in mobile CPCs due to the more local nature, but in some specific areas, e.g. call out services like locksmiths and plumbers, mobile CPCs could be set to far surpass desktop’s. So, if Google can also grapple with its Motorola acquisition, the shift away from engines to apps when searching and other threats like Siri, then maybe their mobile strategy will eventually be driving their profitability.