Google Suffers The Year's Largest Decline In The Price Of Clicks On Search Ads

Google’ fourth quarter 2013 earnings are out, and cost-per-click (CPC), the industry metric for measuring the price of a search ad, declined 11% in the fourth quarter compared to the same quarter last year.

That’s a worse result than the previous quarter, when it dropped 8% year-over-year.

This is the ninth consecutive quarter in which Google’s CPC has shrunk.

This doesn’t mean that Google isn’t pulling in tons of revenue thanks to its search ads.

The volume of clicks on Google search ads grew tremendously during the quarter. In other words, more people are clicking on search ads, and clicking a lot. The problem is that this glut of clicks suppresses prices, even as the huge influx can also translate to more revenue, since each click earns Google money.

Paid clicks for Google were up 31% year-over-year, and 13% sequentially.

Much of the increase in paid clicks is likely to be thanks to searches on mobile devices and in high-growth emerging economies, both of which command lower ad prices.

Enhanced campaigns, Google’s attempt to make its AdWords product less device-specific (and so less tied to cheap mobile clicks), seem to have under-delivered after two quarters in full effect. It seems the flood of mobile-based paid clicks has outweighed any efforts to nudge advertisers toward multi-device campaigns, which might bring in higher CPCs.

“It is fully up and running around the world,” said Google Senior Vice President Nikesh Arora, when asked for his take on the performance of Enhanced Campaigns on Google’s earnings call Jan. 30.

He also hinted toward Google’s preference for a multi-device approach. “Advertisers should be somewhat agnostic on where they want to reach the user,” he said.

Advertisers may gradually become willing to allocate more budget to bidding on mobile clicks. But as long as the volume of mobile clicks keeps expanding at light speed thanks to the smartphone revolution, it’s unlikely Google will see click prices climb. There’s no CPC relief on the horizon.

Click here to download the chart and data in Excel

NOW WATCH: Briefing videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.


Tagged In

research-us