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Google results suggest mobile, desktop CPCs are beginning to converge

Google’s Android makes a splash at CES to ramp up

Google reported that cost-per-click rates actually increased in the fourth-quarter of 2012 compared with the third quarter. The numbers suggest that following a period of mobile weighing down Google’s financial results, the tide may be turning.

Google reported yesterday that the average cost-per-click decreased approximately 6 percent over the fourth quarter of 2011 and increased approximately 2 percent compared to the third quarter of 2012. The average cost per click started declining during the fourth quarter of 2011 and continued to do so over the past year, in part because even as mobile search was growing mobile paid search ads typically to cost less than their desktop counterparts.

“We are starting to see more demand on the advertiser side on mobile devices,” said Roger Barnette, president of IgnitionOne, New York . “As advertisers have caught up with user demand, CPCs have risen.

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“There has been a convergence to bring the average CPC on mobile and desktop much closer to what they have been in the past,” he said.

“In the fourth quarter, we saw the smartphone CPC increase 45 percent year-over-year.”

Good news for Google
Google also reported that the aggregate number of paid clicks in the fourth quarter ended Dec. 31, 2012,increased 24 percent on a year-over-year basis and 9 percent compared to the third quarter.

As the volume of searches taken place have quickly moved over to mobile during the past couple of years, advertisers had not kept up pace. However, more recently marketers have made investments in search campaigns and the mobile experience.

This is potentially a significant positive development for Google as the lower CPCs were a threat to its long-term revenue potential if the trend did not reverse itself.

“The fact that mobile CPCs have grown is what is closing the gap between mobile and desktop for Google,” Mr. Barnette said.

“We think that in the next year, there is a chance that the gap will completely close as demand for desktop continues to fall and mobile continues to rise,” he said.

“It is hard to overstate the significance of this for Google. What we are starting to see is that this gap is going to be more short term – this portends very well Google, that the shift in CPCs may not potentially have as much of a long-term negative impact on revenue.”

A promising year
For the fourth quarter, Google’s revenues from advertising and other totaled $12.91 billion, up 22 percent on year-over-year basis. These revenues represented 89 percent of consolidated revenues.

Revenues generated by Google-owned sites totaled $8.64 billion, up 18 percent. Site revenues accounted for 67 percent of total Google revenues.

Partner sites generated $3.44 billion, other revenues totaled $829 million and international revenues totaled $6.9 billion.

Google reported consolidated revenues of $14.42 billion for the fourth quarter ended Dec. 31, 2012, an increase of 36 percent compared to the same period a year ago. During the quarter, traffic acquisition costs totaled $3.08 billion or 25 percent of advertising revenues.

Google’s net income during the quarter was $2.89 billion compared with $2.71 billion in the same period a year ago.

Motorola Mobile revenues were $1.51 billion, or 11 percent of consolidated revenues in the fourth quarter of 2012.

Google also reported an operating loss for Motorola Mobile of $353 million.

The lower relative cost of mobile advertising was also a thorn in the side for Google, Facebook and anyone trying to generate revenue from mobile advertising during for much of last year.

However, the tide now appears to be turning with Facebook recently reporting growth in mobile costs coupled with the news from Google.

“Mobile is going to be the story this year in a positive way for both the publishers like Google and Facebook and for marketers as well,” Mr. Barnette said.

Final Take
Chantal Tode is associate editor on Mobile Marketer, New York

Associate Editor Chantal Tode covers advertising, messaging, legal/privacy and database/CRM. Reach her at chantal@mobilemarketer.com.

 
Related content: Advertising, Google, mobile search, CPC, IgnitionOne, Roger Barnette, mobile marketing, mobile

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