Google’s CPC Declines Do Not Indicate A Mobile Problem

Google announced its 2014 Q2 financial summary last Thursday. While both click volume and total revenue from the paid ad segment of the report continue to rise over prior quarters, cost-per-click (CPC) continues to fall.

This marks the eleventh consecutive quarter of falling year over year CPC. Certain analysts and reporters see this as a signifier of Google’s continued “mobile problem”, that this decline is symbolic of Google’s continued difficulties monetizing mobile ads.

Ginny Marvin at SearchEngineLand argues that the reported 6% decline in CPC can’t tell us anything about “a mobile advertising problem.” As Google’s reported CPC value is an average of all of its ad sales there are simply far too many variables for anyone to argue that this is a mobile issue.

These uncontrolled variables include:

  • The CPC number reported by Google does not report paid search value alone. It also reflects revenue from all of Google’s other networks such as Maps and Youtube. It also reflects AdSense Content ads, which may be seeing less clicks and lower CPCs due to the increased use of AdBlock on sites, as well as revenue from their in-app ad network.
  • Growth in ads from emerging markets, such as Europe, the Middle East, and Africa would also contribute to a lower CPC due to lower prices in those areas. As Covario’s Alex Funk says, “We know most of Google’s growth is coming from outside North America, which means they are adding search volume but at a much cheaper auction than their established business.”
  • CPCs could also be falling as mobile click share rises. Mobile ads continue to have a lower CPC than desktop, as these lower CPC ads make up a larger portion of click share, average CPC will fall.

Google rolled out “Enhanced Campaigns”, which was meant to make cross-device search campaigns easier to manage in 2013. This combined tablet and desktop ads and automatically opted campaigns into smartphone ads. Most AdWords campaigns switched to Enhanced by July 2013, and then CPC continued to fall in Q3 and Q4 2013. However, as Google does not break out ad revenue by channel or location it is impossible to use these numbers as an indicator of Google’s performance on mobile, or in any other market as it is not possible to isolate the specific cause of lower CPCs.

In fact, large digital marketing companies such as RKG, Covario, and WordStream report significant growth in CPC for their clients in established markets, such as North America, on both mobile and desktop and predict the trend will continue.

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