Google's Cost-Per-Click Declines Again, But Stabilizes

Google reported earnings last week and for the sixth quarter in a row cost-per-click (CPC) declined on a year-over-year basis.

CPC for the first quarter fell 4 per cent from the same quarter a year prior. However, it was the third quarter in a row that saw an improvement in the rate of decline, suggesting Google’s free-fall in CPC is stabilizing.  

The drop is likely due to an influx of search queries from mobile devices. Google completely owns the mobile search market. However, mobile CPCs are still lower than those on the desktop.

Google recently changed its AdWords policy to streamline campaigns and nudge advertisers toward a multiple-device approach. This may ultimately boost CPC, but the policies don’t fully take effect till July 22, which means Google’s CPC may have found its natural floor, once advertisers properly gauged the value of mobile clicks. 

Mobile is a big opportunity for Google, but that doesn’t mean it’s a fresh source of revenue.  As Henry Blodget has pointed out, Google’s revenue is really a function of how much searchers spend with advertising partners, not the total volume of clicks.

Generally speaking, most consumers won’t spend more money with Google’s advertising partners just because they can search for products and services on their smartphones and tablets. There are also doubts as to whether mobile clicks are as effective as desktop clicks in driving sales. 

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