Studies Show Google Enhanced Campaigns Fuel AdWords CPC Rise

One of the first reactions many advertisers had to Google’s enhanced campaigns announcement in February was that CPCs would rise — more advertisers would enter mobile auctions, pushing mobile CPCs up, and tablet CPCs would rise as a result of being tethered to desktop bids.

Early reports from Adobe and iProspect seem to show the higher CPC theory bearing out.

Adobe found CPCs rose 6 percent across devices in the past three months. Based on last quarter’s performance, Adobe now predicts Google CPCs will start rising for the first time in two years.

iProspect also reported CPC increases. The agency started to see CPCs rise across the board beginning in mid-April. By mid-May tablet CPCs were 12 percent higher than the baseline of the previous months, desktop CPCs rose by 14 percent and smartphone CPCs increased 9 percent.

Both companies conclude that enhanced campaign migrations are contributing to the increases seen this year–beyond the typical seasonality upswing the two companies see in the spring. And, both expect to see CPCs continue to rise as more competition enters tablet and mobile auctions.

Google’s slumping year-over-year CPCs of the past two years has primarily been blamed on the lower CPCs for mobile and tablet traffic. In Q4 2012, Google reported CPCs were down roughly 6% compared to Q4 2011, and off 4% from the prior year in Q1 of this year.

Underlying much of the skepticism about enhanced campaigns is a belief that higher CPCs was Google’s ultimate goal. Why else eliminate tablet and granular smartphone targeting where CPCs have been lowest, the thinking goes. These reports and predictions of further increases–in addition to Adobe’s test of Google’s mobile bid adjustments in which the company determined Google’s recommendations are often too high–will likely stoke that skepticism.

Google says enhanced campaigns are designed to set the foundation for a multi-device driven world, simplify account structures, and give advertisers more tools to target users with ads that are relevant to their intent and context. iProspect is among those that have embraced enhanced campaigns for these reasons. The agency was an early adopter and worked closely with Google to migrate all of their clients’ campaigns by mid-June. Jeremy Hull, Associate Director of Paid Search at iProspect, says the CPC increases aren’t triggered by a single account’s migration, but when that advertiser’s competitive set as a whole migrates.

In response to our story on the Adobe report, a Google spokesperson said, “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.”

The volume of spend encompassed in both reports–$100 million through Adobe, $6 million through iProspect–lends weight to their CPC findings and predictions, however. The true test will come later this summer after the switch is flipped and all campaigns begin targeting tablets, and advertisers either embrace and optimize for smartphone auctions or opt-out of mobile altogether.

About The Author

Ginny Marvin

As Third Door Media's paid media reporter, Ginny Marvin writes about paid online marketing topics including paid search, paid social, display and retargeting for Search Engine Land and Marketing Land. With more than 15 years of marketing experience, Ginny has held both in-house and agency management positions. She provides search marketing and demand generation advice for ecommerce companies and can be found on Twitter as @ginnymarvin.