Guest post written by Larry Kim
Larry Kim is founder and CTO of WordStream.
Google last week announced a sweeping overhaul to their AdWords money making machine in a bid to dramatically increase mobile advertising adoption and the Cost-Per-Click (CPC) of mobile search ads – by making their advanced mobile search advertising features work by default, rather than requiring tons of additional effort on the part of the advertiser to make them work, and also by changing the way mobile CPC’s are set.
The new changes, known as “Enhanced Campaigns” will become available to customers in just a few weeks, and are expected to be applied automatically across all advertisers by mid-year. In this article, I’ll explain how the coming changes will impact Google’s bottom line.
Google’s Mobile Search Issue
Over the last 5 years, growth in query volume from mobile phones has been much faster pace than searches from desktop computers. The total number of daily searches on Google from mobile devices is expected to surpass daily desktop search volume by next year.
However in recent quarters, Google has had an issue with mobile CPC’s – a search from a mobile device monetizes at roughly half the rate as a desktop search – and as a result, some have even questioned the future of Google’s advertising business model.
Why Most Advertisers Fail At Mobile Search
In a nutshell, in order for an advertiser to leverage Google’s most sophisticated mobile advertising features and strategies, Google requires that advertisers do a lot of extra work - work so complicated that it is pretty much impossible to do. Currently, advertisers are asked to create multiple different ad campaigns – one for every location and device combination, which quickly becomes difficult as an advertiser may potentially have thousands of such combinations.
In other words, Google subjects advertisers to something of a mobile torture test just to set up mobile ad campaigns, and as a result, the overwhelming majority of advertisers decide that it’s just not worth the hassle. At WordStream, I work with AdWords advertisers in the SMB segment – I estimate that less than five percent of them bothered doing the work of mobile-optimizing their PPC campaigns.
New AdWords Enhanced Campaigns: How They Work
Google is rethinking how we deal with the multi-device world we live in, and is upgrading the decade-old PPC campaign structure so that advertisers can leverage key mobile advertising features by default, without having to create separate campaigns for every location and device combination.
For example, within your ad campaigns, you can just specify if you’d like to bid more or less for mobile clicks, rather than having to create a separate mobile search campaign. And similarly, ads are getting a lot smarter: within a single campaign, you can have different ads for desktop and mobile and Google will make note of what device is executing the search and will correctly pick the right ad to run. Ads and settings will be adjusted for you automatically.
Overall, the idea of Enhanced Campaigns is to take the mobile advertising features that were previously available – but almost never used because they were too hard to implement – and offer them in a much more scalable way for all Google advertisers. This allows an advertiser to focus on advertising their business rather than worrying about what device a Google search originated from.
Mobile Cost-Per-Click Prices Are Going Up
Come June, after the planned auto-upgrade to the new Enhanced Campaigns rolls out, I expect the gap between mobile and desktop CPC’s will be filled. This is due to increased advertiser competition from increased advertiser adoption of mobile search since:
- All existing ad campaigns, including those that previously excluded mobile search will be now opted into mobile by default.
- New ad campaigns will be able to take advantage of advanced mobile advertising features with far less effort.
Additionally, Google will be auto-setting the inaugural mobile bid adjustment factor for all enhanced campaigns – and while there aren’t precise details on how Google will be calculating that number, I’d guess that the default values aren’t going to be set to a value that reduces mobile CPC’s on average. Last month, Google CEO Larry Page was asked on the company's Q4 earnings call if he thought that mobile CPC’s would be catching up to desktop CPC’s any time soon, to which he responded: “I am very, very optimistic about it … we are working to simplify our ad system for advertisers … We don’t have anything to announce today but I am very excited about our efforts there. I think that we will make rapid progress in that area.”
So we now know why Larry Page was so optimistic about mobile CPC’s.
Simplified Mobile Search ROI Tracking
Google is also making it easier for advertisers to better understand the ROI of paid search advertising by making the following changes:
- New Mobile Advertising Conversion Type: The ROI of mobile search is systematically under-reported because conversion tracking is based on a user finding a thank-you page after having placed an order online or completing another goal. In mobile search, the call to action is often to make a phone call, so traditional conversion tracking doesn’t work. So Google is introducing a new mobile advertising conversion type, based on call duration and specified by the advertiser.
- No More Mobile Call Reporting Fees: Previously Google had offered mobile call reporting features to allow an advertiser to see what phone numbers called, when, and how long the calls lasted. This was helpful but a bit bizarre in that Google actually charged advertisers a dollar extra per call to use it – which, sadly, acted as a disincentive to adopt mobile search features! Going forward, Google is dumping the additional fee.
What It Means for Advertisers and Google Investors
I think the changes make a lot of sense. Right now there are a bunch of advertisers that opt out of mobile search because they think (incorrectly) that the ROI isn’t there. In particular, small businesses aren’t too keen on exponentially increasing the number of ad campaigns in their account because that creates work for them. It’s also a bit more challenging to track the ROI of mobile search.
I believe that the ROI of mobile search is very compelling due to factors like precise location, immediacy, commercial intent and 1-click-to-call. It’s always been a matter of just getting the advertiser to adopt the somewhat complicated best practices in terms of campaign setup and reporting to realize these benefits. By greatly simplifying the process, I’m confident that we’ll see an uptake in mobile advertising adoption and ROI. New enhanced campaigns will be particularly helpful for SMBs who are not yet taking advantage of mobile search.
Also, Google will set the default auto-upgrade settings and change the way mobile bids are set, which will likely create some additional upwards pressure on mobile CPC’s.
For a more detailed look at Enhanced Campaigns and the mobile bid adjustment factor, see my longer article at the WordStream blog.
