Google Ad Prices Drop while Clicks Increases
Recent data from Google’s last quarterly report, released on September 30th, shows an interesting trend, Google’s cost-per click prices are decreasing even though the number of “aggregate paid clicks” increased significantly. The decrease in cost-per click prices is not necessarily a surprise, there’s been a steady decline in the average price for the past three years, and in fact many analysts were expecting a more severe drop. However, the fact that ad prices are decreasing, even while Google is significantly increasing the click through rates of its ads in both the mobile and desktop markets certainly seems surprising. It would seem straightforward that ads that create more exposure would be worth more to companies, and that they would begin to pay more as ad click through rates increased.
However, as we have discussed in class, Google ad prices are not solely based on the total number of clicks that ad will receive, but in large part determined by the advertisers’ values for a click in a Generalized Second-Price Auction. And although higher click rates typically translates to higher prices, clearly the advertisers’ are decreasing the values they submit to Google’s auction. The reasons for dropping the prices are varied, one speculation being that while many advertisers are pushing to expand their presence in mobile marketing, and Google has made many changes to boost their mobile click-through rates, advertisers are worried about how much of an impression mobile ads leave on consumers. In other words, while the number of clicks is increasing, companies may be worried the quality of each click is decreasing.
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