Google’s Decline in Cost per Click

Google’s Decline in Cost per Click: Why it is bad for Business and What Is Being Done

In case a lot of you were unaware, search advertising is Google’s most important business but it been in trouble for the past couple of years. Their stock has also been at somewhat of a stand still since December 2013, which causes a major threat to a company like Google and their employees. Business Insider decided to take a closer look into why this is happening.

One thing they discovered is the price that Google can charge per click on their search ads has been on the decline. A large part of this is due to the fact that advertisers expect to pay much less for a click on mobile ads since these users may be less likely to make a purchase after they click through to a site and as we all know, the future, for now, is in mobile. According to “Digital Marketing Report Q4 2014” more than 40% of Google traffic came from smartphones and tablets. This is a 48% rise year over year. When Google announced their earnings for Q4 2014, the cost per click on search ads were down 3% from Q4 2013. To make matters worse, Google said the rate of decline is steadily on the rise.Most of Google’s advertisers are businesses selling products to users on Google, but the quality of their online stores fall short on mobile devices. One threat for Google is that due to the slow mobile adaptation of advertiser’s online mobile stores, users are seeking apps and Amazon and avoiding Google Search altogether which is one reason Google’s stock may have fallen flat for so long. Google has a plan to increase the value of mobile ads without asking advertisers to improve their online stores. They plan to do this through Local Inventory Ads (formerly called Local Product Listing Ads). Local Inventory Ads can appear on Google Shopping or on Google.com.

Released last year, Product Inventory Ads are fairly new to Google but promises to help brick and mortar advertisers take advantage of the online world rather that always falling short. This Google Shopping product allows you to target by location and notify the user if a particular product is available in stores or not. So instead of ordering the product online, shoppers can go directly into the store and immediately purchase a product.

Google says these local inventory ads are effective and between 10% and 18% of clicks on search ads lead to a store visit. Sears Hometown and Outlet Stores claim that Product Listings ads have increased their in store traffic by 122%.
According to Adweek, here is some data to show the effectiveness of its shopping ad products:

Local Inventory Ads drove in-store sales at five times the rate of TV ads—or $8 of in-store sales for every dollar Sears Hometown and Outlet Stores spent on online ads.
Staples’ in-store visits lifted 33 percent after running shopping campaigns through Google.
The click-through rate increased 29 percent for Staples on its product listing ads.