Report: Google 'Enhanced Campaigns' Raising the Cost of Mobile Ad Clicks

If you're not already aware, Google is compelling all AdWords advertisers to adopt Enhanced Cam­paigns by July 22. It's mandatory. And it signals big changes for Google and for search marketing in general. Google dominates paid-search, which is the biggest single chunk of online advertising.

The high-level shifts brough about by Enhanced Campaigns, if you don't already know, are the following:

  • Tablets and PC ads are grouped together and cannot be separated or segmented in campaigns
  • Neither smartphones nor PC ads can be excluded in any campaign
  • Mobile bids are adjusted as a percentage (higher or lower) of PC AdWords bids 

Google's rationale is simple: simplification. Google told us a few months ago that it wanted to make cross-platform campaigns easier to execute and easier to manage. But that means marketers give up some amount of control over bidding and can no longer implement mobile-only campaigns. 

There are many people who accept and agree with that justification. However there's a much more cynical view circulating in parallel, which is that Google is mostly trying to boost mobile CPCs and thus overall mobile revenues -- to compensate for declining desktop CPCs in some cases. 

Increase in CPCs for tablet and mobile campaigns on Google 

 Reversal of negative desktop CPC growth

 

Like all such competing explanations, the truth lies somewhere in-between.

Historically mobile and tablet CPCs were lower and thus a better value for marketers. Now Adobe's digital marketing arm is saying that will definitely change under the new Enhanced Campaigns regime. Adobe based these remarks on "the lat­est search mar­ket­ing and cost-per-­click (CPC) trends across nearly 100 major US adver­tis­ers rep­re­sent­ing more than $100 mil­lion in ad spend from March through May 2013."

The data come from the clients of the former Efficient Frontier, which Adobe acquired in late 2011 for roughly $400 million. 

As the graphs above reflect, mobile CPCs have already begun to rise for advertisers implementing Enhanced Campaigns, while desktop CPCs are stabilizing. According to Adobe:  

With the intro­duc­tion of Enhanced Cam­paigns, the his­tor­i­cally lower CPCs for tablet cam­paigns should increase to reflect desk­top CPCs. We’re only just begin­ning to see this trend mate­ri­al­ize . . . The over­all CPC trends across all devices includ­ing desk­tops also show strong growth. Google CPCs increased more than 6% over the last three months alone — a sig­nif­i­cant jump . . .

One other trend we noticed is that CPCs on Google have sta­bi­lized. For the past two years, Google CPCs fell on a year-­over-­year (YoY) basis due to the increase in mobile and tablet traf­fic where CPCs were lower. How­ever, for the first time in seven quar­ters, the CPCs on Google are flat YoY and we antic­i­pate that CPCs will rise on a YoY basis again start­ing next quar­ter . . . 

Seeking to rebut the perception that the company has successfully manipulated the system to boost its own revenues, Google disputes the assertion that rising prices are inevitable. The company told Search Engine Land earlier this week: 

There have been many speculative reports, but it's far too early for any of them to be reliable. Advertisers will choose their bids and adjust their spend based on the value they see in their campaigns.