Google announced its quarterly earnings reports, and there were some surprises in the nitty-gritty details. For one, revenue was way higher than analysts predicted it would be, at 12% year-over-year ($14.9 billion until the end of the 3rd quarter). Why did Google AdSense revenue go up so much higher than analysts thought it would be?
The answer lies in the total amount of paid clicks, which increased 8% in the quarter and 26% year-over-year. However, the average cost per click fell 8% this year.
Why does this matter to you?
Because if you earn your ad revenue based on CPC, you need to figure out a way to balance out the overall CPC drop. If CPCs drop by 8% and your overall ad clicks increase 26%, then you’ve obviously come out ahead.
But if you aren’t optimizing your site’s ad revenue effectively, then you’ll end up making less than you were before.
Revenue: Up, Up, and Away!
More than offsetting the CPC decline, the increased volume in ad revenue driven by users accessing Google’s services on more mobile devices. So yes, while ad CPCs and CPMs might be lower on mobile devices, people are much more likely to click on things when they’re on the go. For example, if you search for Chinese restaurants in Google Maps, a sponsored result might be the first listing.
If you tap on the listing to call it or get directions, that counts as a click. The same is true of mobile ads: people are more willing to tap on an ad on a website if it means they’ll find what they were looking for faster.
This revenue increase was driven by a change in ad formats as part of Enhanced Campaigns, which mean more clicks per search rather more money-per-click. It’s an element of Google’s expansion in developing markets.
Google has been greatly expanding available ad inventory with new bigger ad formats in the past quarter, so some speculate that perhaps demand hasn’t kept pace with supply. Since the growth of less expensive mobile search ads is outpacing the growth in more expensive desktop clicks, this drags down the weighted average of the two.
Advertisers are still struggling to adopt mobile best practices.
Alistair Dent, head of PPC at PPC specialists agency Periscopix put it this way to MarketingWeek: “Revenue is being driven up by a change in ad formats as part of Enhanced Campaigns, which mean more clicks per search, rather more money-per-click. So CPC stays low, but overall revenue goes up.
This can be as much about the expansion of Google’s presence in developing markets, as about the lag in mobile CPCs. Every time Google opens up a new revenue opportunity, its overall revenues will rise, even though the average CPC is pulled lower.”