When Google’s earnings were accidentally leaked last week, one of the stories lost in the commotion was the continued free fall of cost-per-click (CPC) growth. CPC growth was down 15 per cent from the third quarter of 2011, the fourth quarter in a row it has fallen year-over-year.
The drop is the result of a surge in mobile search queries from smartphones and tablets. Google has an over 90 per cent share of the mobile search market, but mobile CPCs are significantly lower than the desktop.
Conventional wisdom holds that mobile will be an enormous new growth engine for companies like Google. However, ad revenue on one side of the equation is determined by advertisers’ return on investment on the other side. Generally speaking, most consumers don’t purchase more goods because they own a mobile device. They simply shift desktop shopping to mobile. Mobile ad revenues may indeed skyrocket, but it will come partially at the expense of the desktop.
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