There have been a lot of assumptions that Google’s mobile ad business is cause for concern. After its latest earnings report showed the price advertisers pay per ad click fell for the eleventh straight quarter, fears again arose that the search giant isn’t keeping pace with the consumer shift to smartphones. So is Google’s mobile advertising business in trouble? The truth is nobody really knows. In fact, it might be doing great.
We do know that Google reported record revenues and growth in advertising click volume in the second quarter. But the cost-per-click (CPC) number that fuels the discussion about Google’s supposed mobile troubles is comprised of too many parts to provide any real insights into that (or any) aspect of the business.
Here are a few reasons why average CPCs don’t tell us what we need to know:
- The average cost-per-click stats Google reports include more than just search advertising — there is YouTube, AdMob (Google’s mobile ad exchange for in-app ads), display advertising on the Google Content Network, to name a few of the channels rolled up into the overall average. Changes in share among these channels can dramatically impact the average cost-per-click.
- Google’s international business is growing — ad revenue share from International topped 58 percent in Q2 — and when click share increases in cheaper markets the average CPC can go down even as click prices in mature and emerging markets rise.
- Similarly, even though mobile CPCs are lower than they are on desktop, shifts in click volume to mobile can drag down the overall CPC even as mobile ad click costs are rising.
- Industry reports from several large search marketing agencies point to rising mobile CPCs, particularly in mature markets like the U.S., and to increasing mobile advertising globally, as a key driver in rising ad spend among their clients in Q2.
Our story on Search Engine Land goes into more depth on this issue. Check out, Why Google’s Reported CPC Declines Can’t Tell The Story Of “A Mobile Advertising Problem for more detailed analysis.
Data source: Google earnings statements