Many online merchants were concerned when Google confirmed it was making a major change to the ads that appear on its search results pages, getting rid of AdWords ads that appeared along the right side of the page. A major concern: advertisers worried the cost of ads in the remaining placements would increase.
Chris Costello, Senior Director of Marketing Research for marketing firm Kenshoo, has been studying the numbers in the weeks following the change to see how it has impacted the cost, placement, and click through rates of the ads that appear at the top and bottom of Google search results.
In today’s guest column, Costello explains what changed and how it impacted the merchants on the Kenshoo platform – and he shares his conclusions for merchants wondering how to react to the changes.
What Google Changes to the Right Rail Mean for Retailers
By Chris Costello
When the news broke that Google was making a major change to the search engine results page (SERP) and removing text ads from the right hand side (called the right rail) for desktop searches, retailers and advertisers responded with quite a bit of consternation about how these changes would impact the paid search campaigns that have become the lifeblood of many businesses. The new desktop SERP layout will more closely resemble that of the mobile SERP where there is no right rail. At most, seven ads will be shown on the desktop – up to four on the top of the page and three ads at the bottom. The exception will be Product Listing Ads (PLAs), which will remain on the top and right panel on the results page.
With fewer ads on the page increasing competition, there was concern that cost per click (CPC) would skyrocket as users got lost in the newly vacant white space on their screens and the “Golden Triangle” established by numerous eye-tracking studies would fade away. But a week in, the sky has not fallen, and CPC has not skyrocketed.
Week One Results
Following the first full week of the rollout, merchants can breathe a sigh of relief. Across the Kenshoo platform, advertisers experienced a one penny (or roughly 1%) decrease in CPC, average position improved by 0.2 moving ads closer to the top of the page on average, and click-through rate (CTR) increased by one tenth of a percent, which represents a 7% increase over the previous week.
Week-over-week changes to click and spend volume were ultimately within normal weekly variances, with a small increase in clicks and a smaller increase in spending due to the drop in average CPC.
Explaining the Results
With impression supply being constrained, the CTR increase was expected. The changes in CPC and average position are intriguing, on the other hand, but there are potential explanations.
For average position, we track how close paid search ads are to the top of the page, or position number one. A lower average position indicates that ads are shown higher on the page, where prominent visibility can drive more clicks. With this change, however, the smaller number of ads per page can have a material effect on how this metric works in aggregate, as many of the impressions from lower positions simply do not exist to pull the average away from the top. In other words, this may simply be an artifact of how the math works on the new layout.
For CPC, much of the concern was for individual keywords. At an advertiser level, we examine very large sets of keywords, and those sets can behave much differently. Some keywords may be fighting harder for their position, but those are counterbalanced by keywords that may be losing that fight. A bidding algorithm that works across groups of keywords will take all of these different contributions into account.
What It Means for Retailers
Google’s changes feel reminiscent of when Facebook changed its focus from right rail ads to the News Feed. Both moves emphasized visual product ads in place of traditional text ads, and that should be a good thing for retailers. In fact, as noted in the “Kenshoo 2015 Online Retail Seasonal Report,” Shopping campaigns (containing Product Listing Ads) proved to have wide reach with share of impressions increasing from 18% during the 2014 holiday season to 29% in 2015 for desktop, the average order size for Shopping campaigns 3X that of non-brand keywords, a CPC of about 25% less and an ROI almost double.
Retailers clearly already recognized the value of Shopping campaigns and PLAs in driving conversions, sales and revenue and leveraged them during the critical holiday shopping season. Google likely noticed this trend, potentially explaining why this format was not affected by the SERP update and continues to see exposure on that right rail.
Ultimately, retailers and other advertisers should focus less on the change itself and more on adjusting their response to those changes. Leveraging algorithmic bidding technology to make adjustments to the entire portfolio can help, but even those manually monitoring and adjusting campaigns can benefit simply by remaining agile in their bids.
High-ranked keywords will likely perform better due to having fewer ads on the page, which can offset any reduced performance of mid- or lower-positioned keywords, particularly brand terms which still make up a much bigger chunk of desktop search clicks.
About the Guest Columnist:
Chris Costello is Senior Director of Marketing Research for marketing firm Kenshoo, the global leader in agile marketing. Brands, agencies and developers use the Kenshoo Infinity Suite to direct nearly $350 billion in annualized client sales revenue through social, search, mobile, and display advertising. Kenshoo will continue monitoring and reporting on data related to the Google change in the coming weeks. Visit the Kenshoo blog for further updates, and you can reach Chris at chris.costello (at) kenshoo.com.