Enhanced Campaigns Countdown: Latest CPC Trends & Mobile Bid Test Results From Adobe

With the July 22nd mandatory migration to Google AdWords enhanced campaigns looming, we will be checking in with marketers over the next several weeks to get their perspective on the transition process, hear what they’ve learned so far and what advice they have to share.

Today, Sid Shah, Adobe’s Director of Business Analytics for Advertising Solutions, released new findings and predictions for enhanced campaigns based on nearly 100 major U.S. advertisers representing over $100 million in ad spend from March through May 2013.

I spoke with Kohki Yamaguchi, Senior Business Analyst for Adobe Advertising Solutions, about the new report.

CPCs Are Already Rising

“Over the next six months, Google CPCs will rise for the first time in almost two years,” Yamaguchi told me. Tablet CPCs are already rising to reflect desktop CPCs, now that the two are inextricably entwined in enhanced campaigns.

Yamaguchi says, “In the past three months we’ve seen a six percent increase in CPCs across all devices. Tablets had had lower CPCs than desktops, but now the combination is forcing an increase”.

Adobe has tracked a three percent increase in tablet CPCs against desktops, and a one percent increase in mobile CPCs. Shah writes that they expect the percentages to grow as advertisers holding out until the July 22 deadline are forced into enhanced campaigns.

After watching Google CPCs fall year-over-year the past two years, because of the “increase in mobile and tablet traffic where CPCs were lower”, Adobe saw CPCs stabilize YoY. Shah predicts they will start rising YoY next quarter.

Testing Mobile Bid Adjustments

Advertisers who have already made the switch to enhanced campaigns and set their mobile bid adjustments (MBAs) to the level suggested by Google during the transition process may be surprised to learn that their campaigns likely had the same recommended MBAs that nearly all other advertiser campaigns received.

Adobe found that more than 90 percent of all Google mobile bid adjustments were set at either -20 percent or 0 percent.

Google’s MBA suggestions are based on how ‘similar advertisers’ bid on mobile compared to other devices, but we have found that these numbers tend to not reflect the performance of individual campaigns and ad groups. The mobile bid suggestions are not tailored to an advertiser and the performance of a specific campaign.

The company ran a four-week test on a sample set of four major U.S. campaigns to compare Google’s MBA distribution to Adobe’s own algorithmic-ally set MBAs. The test ran for two weeks with Google suggested MBAs and then for two weeks on the Adobe system to see if there were differences in mobile bid distribution and ROI.

From their test, Adobe found mobile ROIs were lower on average than desktop/tablet when using Google’s MBAs, suggesting to them that the MBA recommendations tend to be too high and that mobile bids should be lowered further.

“MBAs can have significant effect on overall ROI,” says Yamaguchi. “You want to see a nearly 100 percent ROI ratio between mobile and desktop and tablet.”

Rather than simplifying bidding for advertisers, Shah writes that bid adjustments “complicates matters for the advertiser. Not only does one have to consider the bid but also the mobile adjustment factor to get the most out of a search campaign”.

Yamaguchi foresees a “war of who can build the best algorithm,” saying, “Advertisers need to calculate how the MBAs will interact with the base bids, and we see algorithms becoming more important” to be able to optimize at scale.

Yes, the call for automated algorithmic bidding platforms is coming from the algo guys, but it does beg the question of whether some advertisers will find enhanced campaigns harder to manage, or less efficient, rather than easier with better ROI, because of the layer of complexity mobile bid modifiers — as well as other targeting options like geo and day-parting — add to bid management.

Still, Adobe expects the rising CPCs to push spending on Google beyond the current 15 percent YoY growth that has thus far been driven by volume.

Update: A Google spokesperson responded, “There have been many speculative reports, but it’s far too early for any of them to be reliable. Advertisers will choose their bids and adjust their spend based on the value they see in their campaigns.” 

Optimize Your Site For Tablets

In a point that often gets overshadowed by the focus on optimizing for smartphones, Shah notes that all advertisers — whether they’ve been running smartphone-only campaigns or have been targeting tablets specifically already — will have to focus on optimizing their sites for tablets. Shah concludes that with the forced inclusion of all advertisers on these devices, and as “the CPC advantage goes away, marketers have to focus on better user experiences to increase the conversion rate on tablets.”

Note:  This is part of an ongoing, occasional series about how marketers are prepping for the migration to enhanced campaigns.