FURY AT GOOGLE: Advertisers Say New Search Rules Are 'Stealing' From Them

Larry Page SadGoogle CEO Larry Page

Photo: Justin Sullivan/ Getty Images

That didn’t take long: Just 24 hours after Google announced it was changing the way Adwords works on mobile devices, a whole bunch of advertisers have come out to say that they regard the move as unhelpful at best and a cynical back-door price increase at worst.Previously, advertisers bought separate search word campaigns on mobile, tablet and desktop devices. They paid different prices for each type of device, depending on the demand.

There are fewer bidders for mobile users, however, and cost-per-click prices on mobile were thus lower. In fact, Google in November had to warn Wall Street of a “deceleration” in its desktop ad business caused by a shift of advertisers into the cheaper mobile medium.

Now, Google is simplifying its Adwords process by making advertisers buy search words across desktop, mobile and tablet devices all at once. Advertisers will get less of a choice about where their ads appear. Advertisers can weight their campaigns in favour of mobile or desktop, but they can’t focus only on one medium. That will have the effect of lumping demand together across devices, and raising prices overall. There is no guarantee they’ll get better results, either, these advertisers say.

One search marketing exec told ZDNet:

“They’re stealing money from advertisers because they can,” he said. “It’s the most lowbrow thing Google has ever done. The damage this is going to do to advertisers is big. They’re going to sell a story to the public and be the Wizard of Oz behind the curtain.”

iProspect, a search marketing agency, said:

Advertisers who do not have a smartphone strategy will be forced to come up with one, or leverage the bid multiplier workaround (setting the bid multiplier to negative 100 per cent) to opt out of smartphones. Advertisers who don’t take the time to make this adjustment, or are unaware of it, will start serving ads on smartphones unintentionally. This is an example of Google deciding what is best for the advertiser – however, in this case they’re not just opting you into a setting by default, they’re removing the option of opting out or using a workaround. iProspect believes that the increase in the number of advertisers participating in the auction on smartphone searches will lead to increased overall CPCs.

Search Engine Watch described the move as “cynical“:

A cynic might suggest that this move will change the pattern of mobile bidding. By removing advertiser control at a keyword level we might see mobile CPCs rise, pushing up Google’s revenues by pretty serious amounts.

And in a carefully worded opinion piece, Adobe came out swinging against Google, noting that it was now impossible to run a tablet-only campaign, and that advertisers might see lower return on investment for higher costs:

Accord­ing to Google’s announce­ment today, adver­tis­ers can no longer tar­get tablet users indi­vid­u­ally.  Tablet users will be lumped in with desk­top users, while smart­phone users can be tar­geted dif­fer­ently through Google’s new “Enhanced Cam­paign” func­tion­al­ity. …

That’s just half of the story though. Cur­rently, CPCs are lower for tablets given that com­pe­ti­tion for tablet traf­fic is still rel­a­tively low (but increas­ing).  By lump­ing the higher per­form­ing tablet traf­fic in with desk­top traf­fic, rev­enue per search (RPS) will increase for Google as CPCs increase on the com­bined desk­top and tablet traf­fic.  This, pre­sum­ably, will address Google’s mobile mon­e­ti­za­tion gap as an increas­ing share of searches is com­ing from tablets and smartphones. 

The down­side for adver­tis­ers in the long run is they may see lower over­all ROI as these CPCs creep up.

The critics are right about one thing. Google’s CPC has been declining for a while, and it’s almost certainly because of mobile. Here’s a chart:

Google Q4 2012

Photo: SEC

Following that decline, Larry Page told investors on his Q4 earnings call that Google may have been wrong to encourage advertisers to pursue mobile-only marketing strategies.

It’s rare for their to be this level of public protest, this quickly, when a major advertising partner like Google changes it policies. In the ad biz, people tend to be polite in public and express their displeasure behind the scenes.

So expect Google to take these complaints seriously.

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