Early results are in from the Google AdWords Enhanced Campaign migration; Google’s revenue was up 18% year-on-year and soon we expect a hefty increase in advertisers’ cost-per-click (CPC) due to Google Enhanced Campaigns. Why’s this so important? Increased CPCs = Increased Costs = Lower Return on Ad Spend.
According to Matt Kapko, a freelance reporter for ClickZ, more than 1.5 million campaigns have already migrated over to Enhanced campaigns. Now, I am not sure how many total campaigns are active on Google AdWords, but based on Fathom’s current rate at which campaigns are being transitioned over to Enhanced (and from others participating in #PPCChat), I’d say that’s definitely not the majority. What’s scary about this are these ‘early adopters’ that have contributed to 1.5 million campaigns that have been transitioned most likely are the ones that know what they’re doing to some degree. For example, they understand how to opt out of mobile if necessary.
Why do we think CPC is going to rise as a whole for Google AdWords customers?
- Cannot Exclude Tablets: In the past, advertisers would exclude tablets from their advertising, especially if they noticed a much lower return on ad spend. Enhanced campaigns will force advertisers to bid equally for users on computers and tablets. More advertisers = more competition = higher CPC.
- Cannot Target Specific Operating Systems: Legacy campaigns allowed exclusive targeting of iOS, Android, or Windows devices. Sometimes advertisers noticed a higher return from certain operating systems and would target accordingly. Now they will have to advertise to all operation systems simultaneously. Again, more advertisers = more competition = higher CPC.
- Automatic Opt-in to Mobile: Advertisers will now be automatically opted into mobile. The only way to not show up on mobile is using a -100% bid adjustment. Many advertisers will not be aware of this and advertise on mobile devices unwittingly. Last time: More advertisers = more competition = higher CPC.
- Aggressive Stacked Bidding: With the various bid adjustments easily done now with enhanced campaigns ( by device, by location, and by hour of day/day of week), some advertisers might not understand the impact of stacked bidding and how much this can increase their max CPC. Higher CPC by competition = higher CPC for ALL advertisers!
For more details, read my previous blog post on changes Google could make to give advertisers back the control they’d like.
Long story short: CPC is going to rise for all advertisers, especially after all campaigns are migrated to enhanced campaigns (officially July 22, 2013). What’s this mean? Advertisers should expect a lower return on ad spend (ROAS) from Google AdWords if they keep everything else constant. So, what are the top ways to combat the inevitable decrease in ROAS after this transition is in full effect?
- Conversion Rate Optimization (CRO): Improve your current conversion rate from your AdWords campaigns by testing various elements until you find statistically significant results. Advertisers must look to focus more on turning visitors into customers.
- Mobile Web Site, Landing Pages and Apps: Whether you like it or not, mobile advertising is the future. According to Gregory Kennedy, VP of Marketing at Tapsense, PC sales declined 14% in Q1 of 2013. Gregory recommended moving 50% of digital advertising budget over to mobile due to the opportunity here. More than 88% of smartphone owners have at least 1 online session per day. When they’re finding you on mobile devices, it’s important your website presents a mobile-friendly experience. See the figure for frequency of daily smartphone online sessions below:
- Utilize Ad-Group-Level Sitelinks: Ad-group-level sitelinks are an easy way to improve click-thru rate, quality score, and potentially lower your campaigns CPC’s. Ad-group-level sitelinks are especially important for e-commerce PPC and other accounts that have several products or services, as they will help move the user further down “the funnel,” making conversion more likely.
In conclusion, it’s extremely important to take advantage of the benefits from enhanced campaigns, but more importantly, find other ways to combat the inevitable rising CPC that is predicted to occur.