Google's 'Enhanced Campaigns' Fail To Prop Up Cost-Per-Click

Google’s latest earnings are out, and though the company’s revenues surpassed expectations, there was no improvement in cost-per-click, or CPC.

Cost-per-click, the industry metric for measuring the price of a search ad, declined 8% in the third quarter compared to the same quarter last year. That’s a worse result than the previous quarter, when it dropped 6% year-over-year.

(CPC was also down 4% sequentially.)

This is the eighth consecutive quarter in which Google’s CPC has declined.

This is in part the result of a supply effect. Google served a huge volume of paid clicks during the quarter. Volume was up 26% compared to the third quarter of 2012, and 8% sequentially. High click supply suppresses prices, even as the huge influx can also translate to more revenue.

Not to mention, much of the increase in paid clicks is likely to be thanks to searches on mobile devices and in high-growth emerging economies, which command lower ad prices.

What’s disappointing, though, is that the third quarter was the first quarter in which Google’s recent changes to its main AdWords product were fully implemented.

Enhanced campaigns, as the changes were called, were supposed to make Google’s search ads less device-specific. The thinking among paid search marketers was that these changes would boost bids and bid prices for smartphone search ads, because enhanced campaigns in effect push many advertisers on the mobile sidelines to bid on smartphone and tablet traffic.

Enhanced Campaigns were fully implemented across all devices as of July 22, yet CPC failed to increase. Instead, it slumped even further.

On the earnings call, Google SVP and Chief Business Officer Nikesh Arora stressed that many clients are still adjusting their campaigns and multi-screen bidding strategies.

In a research note, Morgan Stanley said it believes many advertisers are still confused by Enhanced Campaigns.

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