September 16, 2014

Q2 Earnings Show CPC Down, So Where’s Google’s Growth Coming From?

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Wordstream

google's growth

Google’s latest earnings call was a bit mixed – while Google saw a 22% increase in revenue over last year, bringing earnings to $15.96 billion in the second quarter of 2014, and the search giant narrowly beat analyst projections of $15.6 billion in revenue, their ad sales in the US and the UK, their two major markets, have slowed.

Non-US revenue (excluding the UK) of $7.7 billion accounted for 48% of total revenue. Their earnings per share were considered a miss as well, at $6.08.

The proliferation of ads in emerging markets worldwide drove profits to $3.42 billion for the period, up from $3.23 billion in Q2 2013. More people are clicking on Google ads – a lot more. Total paid ad clicks were up 25% over last year and up 2% over the first quarter of 2014.

However, the average cost per click is falling as CPC is down 6% from the same period last year (click graph below to enlarge).

kim1

This is a continuation of a two-year trend. If you’ll remember, most of the PPC industry believed Enhanced Campaigns would drive up average cost per click, but that hasn’t panned out.

The fact that CPC’s continue to fall is great news for advertisers. But is it good news for Google? They’re showing impressive growth, but it’s still an earnings miss, so you can bet that they’re going to continue aggressive monetization of the SERP:

  • Sponsored results, AKA paid search ads, no longer have a colored background, but rather a small label. When ads are less obviously ads, they can take up more of the SERP without users noticing. Again, this is actually beneficial for advertisers – good for you if they think your ad is a natural result.
  • The recent deletion of authorship photos from the SERP, followed closely by the loss of video snippets might point to a larger trend: Is Google going to remove all visual elements from the organic results, so that only the paid ads have eye-grabbing images? If so, that sucks for SEOs.

Here’s the old ad look:

old ad

And here’s the new ad look:

new ad

That yellow background stood out more than the yellow label, wouldn’t you say?

Since greater mobile adoption and increased penetration into international markets are continuing to drive average CPC down, Google has no choice but to look for growth in increased overall impressions and clicks. You know what that means: More ads – everywhere.

You can read the rest of the earnings results (PDF) straight from Google.

Mobile Photo via Shutterstock

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Larry Kim


Larry Kim Larry Kim founded WordStream in 2007. He serves as company CTO and is the author of 4 Award-Winning Books on Software Development. Larry also blogs at the WordStream Blog and practices photography in his spare time.

3 Reactions

  1. Authorship instantly came to my mind when I saw the title. I am thinking that they may have sabotage themselves by suddenly removing authorship. Even if they did that, it seemed that they are not necessarily earning more. Well, I think it is because this is more than numbers. It is about how the public view the search engine. If it is something that they don’t trust, most advertisers will likely ditch it for alternative platforms.

  2. Could the CPCs also be going down because some advertisers might be exploring other ad platforms, other competitors? (FB/Twitter advertising)

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