Google Winning Online Ad War

Google Inc. seems to be on the winning road of the online ad war although it is losing the battle against the falling prices of advertisements. The company revealed its earnings report in which it showed that there was again acceleration in the decline of a key pricing metric because the cost per click of the company was reduced by 8% as compared to last year. A surge in mobile advertisement was the reason behind this surge, which has a lower cost per unit, but its click rates are also lower in comparison to the ads that are served on desktop computers. The CEO of Google Inc., Larry Page said that mobile device users contributed to about 40% of the traffic on the video site of the company, i.e. YouTube.

In contrast, it had only been 6% 2 years ago. However, the search engine giant was able to use higher volume for making up for lower prices as there was a 26% year on year increase in its number of paid clicks. As compared to it, Google’s rival Yahoo had reported a 21% less figure of paid clicks. A 19% increase in quarterly revenue was the net result or 12% when also considering the lagging Motorola handset unit owned by the company and net income also surged by 36%.

It is indicated by the ad numbers that the downward pricing pressure, which occurred because of a boost in mobile ad traffic has only been slowed down instead of stopped because of the changes made by Google in the way it sells advertisements. People who have been watching the company closely will remember that it was 15 months ago when the impact of mobile ads on the business of the search engine giant were revealed as it had announced its quarterly earnings report for July 2012.

It was the then that the company had announced a 16% year on year decline in its cost per click, which had alarmed Wall Street enough to cause a short term decrease in its stock price. In response, the company had made some changes to the way it dealt with professional online ad buyers and had taken away their right to target ads to desktops, smartphone or tablet users. Instead, Google now determines when and here text and video ads should be placed using its own technology and thus concluding the most optimal platform for placing the ad.

This new method has been dubbed as ‘enhanced campaigns’ and with its help, the company had managed to reduce the annual rate of its cost per click rate decline to 4%. However, during the last two quarters, the decline seems to have accelerated and prices have been falling twice at the same rate, primarily because of mobile. The algorithms of the company cannot change the fact that cheap-looking text ads that pop up on tablets and smartphones are more irritating than enticing to customers. These annoying ads aren’t clicked on much and therefore, mobile ads have a cheaper per unit cost.

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