Google removed the text ads on the right-hand side for desktop February 22nd. Google Shopping will still appear on the right side and the top positions will now allow up to four ads. This change happened on tablets already in 2014-Q4, and with this update users will have a similar experience across all devices. The ad slots below the organic search results remain unchanged, still serving up to three ads. All in all, it leaves us with the potential of seven text ads in total going forward.
The search result page on Desktop is now showing up to four text ads on top and the right-hand side ads have been removed. The right-hand side will still show Google Shopping ads. Will other content be added in the future?
According to Google, the overall motivation is to improve both the user experience and advertiser performance. The latter should improve by increasing the overall effectiveness of the ads, through adding another high-CTR top ad and at the same time removing the low-CTR ads on the right hand side. The user experience is improved by creating a more consistent user experience across all devices.
What will come out of this?
There are a lot of blogs stating that CPC’s should rise due to this change, but I don’t fully agree with that. Has the value of a click increased as a result of more ads in the top position? We have to remember that Google AdWords, together with most digital advertising platforms, is using auction based pricing. That means that CPC’s should, at least in the long run, reflect the values generated per click (or impression) relative to the required return on investment of the channel. As long as either the value itself or the required ROI doesn’t change, neither should CPC’s change. For some industries, it might be the case that the required ROI is lowered to profit-maximise based on higher volumes, but those effects would probably require a more drastic change of the SERP. Another possibility is that the conversion rate could go up, but that will be limited to a small portion of the queries (more on this later).
In general, the only arbitrage that could be found in the AdWords auction is the optimisation of Quality Score, and it will not change between advertisers due to redesigns of the SERP. I do expect however, that CPC’s will fluctuate more on short term, as a result from advertisers testing different bids in order to gather information needed for updating their search strategy based on the new SERP.
Even without this SERP change, I do think that we will see increases in CPC’s over the coming years, but that will be a result of advertisers becoming more efficient combined with the use of better analytical models for understanding the true (full) value of search by assessing ROPO-effects, understanding cross-device behaviour, modeling the customer lifetime value and improving the attribution models in use. Independent of what changes Google makes to the SERP, or whatever change we will see in another auction-based advertising platform, that is where I think the focus should be.
One thing that will impact advertisers due to this change is that volumes will increase and become more focused towards the advertisers that has a value per click (or impression) that corresponds to the bids that are required to obtain the top positions. This means that there will be a higher barrier of entry for non-efficient businesses, and volumes will decrease for those of them who already exist in the auction.
Starting on February 23rd, we implemented additional tracking in many of our advertisers accounts in order to analyse the impact on a more granular level. We are focusing fully on maximising performance during the short term window that will have more fluctuation in CPC’s and we keep our relentless focus on creating arbitrages through higher relative Quality Scores. Apart from this, we invest more than ever in our Data Science department in order to understand the true value of each interaction, in every channel.