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Google Focus on Ads Leads Retailers to Pay More for Exposure

Google’s advertising clients are likely to be paying more in costs per click going forward, as the impact of the changeover to Enhanced Campaigns makes itself felt through the holiday season. Meanwhile, the share of clicks being garnered by Product Listing Ads has more than doubled year over year.

That’s some of the determinations presented by marketing agency PM Digital in their Search Rewind: Retail Trends, Benchmarks & Insights report for 3rd quarter 2013.

Among their observations about Google, PM Digital makes an interesting point about the search engine/advertising company’s recent earnings call. While Google said costs per click (CPCs) are down 8 percent, PM Digital remarked “this was primarily driven by a high proportion of mobile clicks which cost less than that of desktop/tablet.” It continued, “In the retail vertical, the penetration into mobile paid search is quite low relative to that of desktop/tablet primarily driven by much lower conversion rates. Because of this, mobile paid search performance typically falls outside the range of target profitability goals for retailers.”

The report also contended that better performing advertising units that are more expensive have added to the rise in CPC. Likewise, PM Digital contends declines in organic search traffic to retailers means ecommerce pros are relying on paid search to maintain or grow sales.

“The last element impacting higher spend in the paid search channel is the decline of SEO traffic driven by changes to the SERP, which is increasingly becoming more advertising-focused. In order to replace sales lost to declines in natural search traffic, retailers are turning to the paid search side in order to at least maintain, or preferably, grow sales YOY.”

However, individual advertisers engaged in Google’s Enhanced Campaigns may be seeing their CPC drop since the transition to that model took place. According to the report, 47 percent of PM Digital’s clients experienced lower CPCs after the changeover to Enhanced Campaigns took place.

For those who have seen CPC go up with Enhanced Campaigns, it’s likely driven by that currently popular digital and portable device, the tablet. As more people shop with tablets, they are seeing and clicking on ads. Those particular clicks cost more since they now cost the same as a desktop click thanks to Enhanced Campaigns.

Online sellers will also want to note this about the approaching holiday shopping season as they plan their advertising. A late Thanksgiving means six fewer shopping days in the US this year, and PM Digital made this observation about the difference between 2012 and 2013 on that point:

“As many will recall from Holiday 2012, sales moved earlier in the calendar, declined considerably in the second week of December and then picked back up again shortly before shipping cutoffs. This year, without that lost week in December, sales should be more even and comparable to the spread from prior years.”

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David A Utter
David A Utter
David A. Utter is a freelance writer based in Lexington, KY. He has covered technology topics from search to security to online business and has been quoted in places like ZDNet and BusinessWeek. He considers his appearance on NPR's "All Things Considered" with long-time host Robert Siegel a delightful highlight. You can find him on Twitter @davidautter and on LinkedIn.