With Google's cost per click (CPC) falling for five consecutive quarters---after eight quarters of gains---the search giant moved to upgrade its AdWords model, which happens to be the profit engine of the company. The catch: Advertisers may not like the changes because they lose a lot of granularity and visibility into campaign data.
In a blog post, Google outlined "enhanced campaigns." These campaigns are designed to bridge multiple screens---smartphones, tablets, PCs etc.---as well as consolidate reporting. In other words, the new AdWords, used by businesses everywhere, will be more mobile friendly.
The benefits outlined by Google include the following:
Contextual data on device, location and time of day. One campaign will handle bid adjustments for all screens.
Ads optimized for user context.
And reports to measure conversion across devices.
What's the downside? One search engine marketing professional, who wanted to remain anonymous, said that Google's move is aimed at getting advertisers to pay more. The overall trend in recent quarters has been that advertisers have been paying less for Google inventory.
The biggest issue for this SEM exec was that Google is basically the only game in town. His working theory was that Google was essentially lumping desktop and mobile ads together to juice CPC rates to preserve its cash cow. After all, mobile rates are far lower.
His key points:
Mobile has hampered CPC rates. Google has been telling advertisers to split out mobile campaigns and now has reversed because it had to.
Now by bridging campaigns it has created a blind market where advertisers are expected to believe Google works in their best interests.
The tools behind the enhanced campaigns---Smart Pricing, Google's algorithm to sniff out content that isn't valuable, and Enhanced CPC, where Google gets advertiser data in the name of better pricing---need work. This marketing pro said that Smart Pricing is "a running laughing stock" among Google search partners ranging from Ask.com to WebMD to others. Enhanced CPC is closer to being workable.
The bottom line is that Google can't figure out the monetization riddle for mobile. Google's recommendations for two years has been to separate mobile campaigns. That advice has helped advertisers because it highlighted the true value of mobile traffic, which isn't as valuable. The separation of campaigns helped advertisers at Google's expense.
By rolling the campaigns together mobile campaigns CPCs should improve for Google. "Smart Pricing and bid modifiers will take away granularity because it harpooned Google's revenue," he said. "They're putting the campaigns back together because Google can't figure out mobile."
Another issue is that advertisers will have trouble creating landing pages for one keyword that goes to multiple screens. The burden will be on advertisers to sniff the device type.
Smart Pricing is cloaking Google's behavior. "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."
Another search marketing executive, who also wanted to remain anonymous, had this to say:
One bid means that you have to trust Google that it will provide the best experience. "For the sophisticated advertiser, this move is a giant step backwards," she said.
Ads on smartphones, tablets and desktops perform very differently because consumers in a different state of mind. "We're basically saying we're giving up the message and hope Google serves up the right one," she said.
Google is missing revenue targets and average CPC is going down because mobile inventory is significantly less than the desktop.
Advertisers lose visibility because mobile is rolled into other ads. "What they're changing is that you have one bid and adjust up and down, but you have to trust us," she said. Google doesn't have a great track record in serving up what's best for the advertiser, she added.
The company is losing trust with advertisers because it does what's in the best interest of revenue not the customer. "Google has to be very careful of the game they are playing. If they are playing Wall Street's game they will degrade both advertiser and consumer experiences," she added. "These decisions are being made by finance guys not marketers."
Advertisers are stuck with Google due to market share---for now. "We have to play their game," she said. She held out hope that Facebook may be more critical to her agency in the future to offset Google in search and advertising. "Facebook is creating partnerships that allow you to take targeting beyond just Facebook and into retargeting," she said. "I think there is a very bright future there."
Bottom line: Advertisers and many businesses are going to hear a lot of tales about how CPCs are going up. What's good for Google may not work out for all the businesses using AdWords.