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Android has a lot of defensive value, but if you're saying having Android makes up for a new normal with lower CPCs then Google shareholders are in for a rough

by IBM 12y ago

Android has a lot of defensive value, but if you're saying having Android makes up for a new normal with lower CPCs then Google shareholders are in for a rough ride.

Zaheer 12y ago
Not just Android, but AdMob. AdMob consistently beats every other mobile ad network I've tried for my apps by a large margin.
nostrademons 12y ago
So, here's my hypothesis for what's driving the lower CPCs in mobile. This is based on my observations of what I see myself and other people using Google for, not any inside information (I worked in Search, and they generally kept me away from the Ads numbers). People use desktop search to research big-ticket items: cars, vacations, mortgages, life insurance, mesothelioma, consumer electronics, etc. There's a lot of value in a sale there. A personal-injury lawyer may collect hundreds of thousands of dollars from a client with a solid case. As a result, these keywords get bid up really high, because the profit potential of a new customer is high. People currently use mobile search for day-to-day local needs. What restaurant should I go to? Where can I find parking? What's there to do in this town? Most of these have sale prices in the $10-50 range, and so there's just not as much money coming out of the sale. As a result, the keywords don't get bid up as high, and CPC is lower. These use cases are not substitutes. Just because people are searching for restaurants does not mean they aren't also searching for mesothelioma. We see this in the revenue numbers, which continue to rise. But as a percentage of the total addressable market, high-value keywords like insurance and lawsuits will shrink as the market becomes larger. If you're looking at aggregate CPC numbers this will look like Google is becoming less attractive to advertisers, but what's actually happening is that Google is becoming viable for less attractive advertisers. The total market size is expanding, and with that come more marginal customers. This, BTW, is one reason why I think Wall Street analysts are idiots. They pay attention to the wrong metrics, because those are the only numbers they have to pay attention to. I have my own set of metrics that I use to judge when it's time to sell Google stock, but I'm not going to reveal them here.
- IBM 12y ago
  I think CPCs are declining because mobile is inherently tougher to monetize with the smaller screen real estate and Google not being the default destination for everything (like they are on desktop). There's lots of competition for attention on mobile and apps are silos out of Google's reach (though they're trying to combat this with app indexing). Paid clicks are growing rapidly, but that seems to be more from them squeezing the pennies out of their desktop properties. There will be a natural limit to the amount of ad inventory they can fill it up with as well. Facebook isn't having the same problems monetizing mobile. I haven't looked too deeply into their results, but last I checked their ad margins are rising rapidly. Facebook ads seem to be a lot more valuable to advertisers than a Google ad, and they have lots of runway with a lot of premier real estate on mobile devices (Instagram, WhatsApp). If the "post-pc" trend continues and people increasingly do their computing on tablets or phones, the future doesn't bode well for Google.
  - nostrademons 12y ago
    The smaller screen space would show up in mobile revenue (which is not broken out by Google, so we don't actually know whether that's happening), but not in mobile CPC. CPC is "cost-per-click", so if fewer ads are shown per page, there will be fewer clicks, which might even drive CPC up if only the highest-quality ads are shown. CPC as a metric is usually used as a proxy of the value of a Google ad to an advertiser; because of the auction system, an advertiser bids only what the ad is worth to them. Facebook has a very different ad strategy on both desktop and mobile. They target brand awareness much more than purchasing intent. As a user, I'm starting to see Facebook ads in my newsfeed of sites I never searched for or Liked on Facebook; AFAICT, they're using cookie data from the advertiser's website itself to inject the ad into your stream, so that you're reminded of the product on a regular basis. I can see why this would be worth a lot to the advertiser (targeted brand advertising!), but as a user, it is creepy and annoying as hell.
    - IBM 12y ago
      I'm aware of what CPC is. Screen real estate limits the display ads and are much less compelling on mobile.

by IBM 12y ago

Android has a lot of defensive value, but if you're saying having Android makes up for a new normal with lower CPCs then Google shareholders are in for a rough ride.

Zaheer 12y ago

Not just Android, but AdMob. AdMob consistently beats every other mobile ad network I've tried for my apps by a large margin.

nostrademons 12y ago

So, here's my hypothesis for what's driving the lower CPCs in mobile. This is based on my observations of what I see myself and other people using Google for, not any inside information (I worked in Search, and they generally kept me away from the Ads numbers). People use desktop search to research big-ticket items: cars, vacations, mortgages, life insurance, mesothelioma, consumer electronics, etc. There's a lot of value in a sale there. A personal-injury lawyer may collect hundreds of thousands of dollars from a client with a solid case. As a result, these keywords get bid up really high, because the profit potential of a new customer is high. People currently use mobile search for day-to-day local needs. What restaurant should I go to? Where can I find parking? What's there to do in this town? Most of these have sale prices in the $10-50 range, and so there's just not as much money coming out of the sale. As a result, the keywords don't get bid up as high, and CPC is lower. These use cases are not substitutes. Just because people are searching for restaurants does not mean they aren't also searching for mesothelioma. We see this in the revenue numbers, which continue to rise. But as a percentage of the total addressable market, high-value keywords like insurance and lawsuits will shrink as the market becomes larger. If you're looking at aggregate CPC numbers this will look like Google is becoming less attractive to advertisers, but what's actually happening is that Google is becoming viable for less attractive advertisers. The total market size is expanding, and with that come more marginal customers. This, BTW, is one reason why I think Wall Street analysts are idiots. They pay attention to the wrong metrics, because those are the only numbers they have to pay attention to. I have my own set of metrics that I use to judge when it's time to sell Google stock, but I'm not going to reveal them here.

IBM 12y ago
I think CPCs are declining because mobile is inherently tougher to monetize with the smaller screen real estate and Google not being the default destination for everything (like they are on desktop). There's lots of competition for attention on mobile and apps are silos out of Google's reach (though they're trying to combat this with app indexing). Paid clicks are growing rapidly, but that seems to be more from them squeezing the pennies out of their desktop properties. There will be a natural limit to the amount of ad inventory they can fill it up with as well. Facebook isn't having the same problems monetizing mobile. I haven't looked too deeply into their results, but last I checked their ad margins are rising rapidly. Facebook ads seem to be a lot more valuable to advertisers than a Google ad, and they have lots of runway with a lot of premier real estate on mobile devices (Instagram, WhatsApp). If the "post-pc" trend continues and people increasingly do their computing on tablets or phones, the future doesn't bode well for Google.
- nostrademons 12y ago
  The smaller screen space would show up in mobile revenue (which is not broken out by Google, so we don't actually know whether that's happening), but not in mobile CPC. CPC is "cost-per-click", so if fewer ads are shown per page, there will be fewer clicks, which might even drive CPC up if only the highest-quality ads are shown. CPC as a metric is usually used as a proxy of the value of a Google ad to an advertiser; because of the auction system, an advertiser bids only what the ad is worth to them. Facebook has a very different ad strategy on both desktop and mobile. They target brand awareness much more than purchasing intent. As a user, I'm starting to see Facebook ads in my newsfeed of sites I never searched for or Liked on Facebook; AFAICT, they're using cookie data from the advertiser's website itself to inject the ad into your stream, so that you're reminded of the product on a regular basis. I can see why this would be worth a lot to the advertiser (targeted brand advertising!), but as a user, it is creepy and annoying as hell.
  - IBM 12y ago
    I'm aware of what CPC is. Screen real estate limits the display ads and are much less compelling on mobile.