Feb. 24 – Updated content and commentary below original content
When the news broke that Google is removing ads on the right side of search results, the cry came out from the PPC team;
“THE SKY IS FALLING!!!”
I’m kidding, but this is certainly a major change in the paid search world with potentially game-changing implications. Now before we actually go full Chicken Little, let’s bring you up to speed on what’s actually happening, and how it will affect advertisers.
What Is Even Happening?
So if you haven’t heard yet, Google is phasing out ads that appear on the right side of search results. To counterbalance this sudden decrease in ad space, they will be increasing the number of ads above search results from 3 to 4 for high commercial intent searches and more frequently showing ads at the bottom of the page.
Why Is Google Doing This?
Google has always emphasized the importance of user experience. With the often negative general opinion of ads and the rise of ad blockers, Google could be taking preemptive action before the advertising environment is too negatively affected.
By removing right side ads, it cleans up the look of search results so users aren’t overwhelmed by the amount of ads. And by limiting the top ads to only four, it ensures users mostly see only the best quality ads that can provide value to them.
Google is also a business, one that revolves almost entirely around selling ads. They could be simply applying the 80-20 rule to search ads by focusing on the minority of ads that generate the majority of revenue. Studies have indicated the clickthrough rate for ads in the top positions are way higher. Since advertisers only pay Google per click, pushing up the prices for those top positions could offset the volume lost by removing the cheaper side ads.
There are also some other reasons that may have factored into Google’s decision. With the world moving increasingly toward mobile, this could be an attempt to better align the layout of desktop search results to those of mobile devices. I would guess that Google used insights from the increase of top mobile ads from 2 to 3 when making this change. This move also standardizes ads by making them all the same size.
What Will Happen to Your AdWords Campaigns?
Clickthrough rates for many advertisers will decrease. For lower ranked ads & keywords (positions 5+), click rates will likely drop. Previously, these ads appeared above the fold (viewable without scrolling) so there was an initial exposure to users. With strong ad copy, you could get good clicks at a lower price, but now even seeing these ads will occur less often. Whether these clicks will go to the top ads or to organic results is yet to be seen. Beyond clicks, there is a branding benefit to companies just from showing their ads to users, but now it’s less likely people will see their ad and gain familiarity with their name.
Costs per click will increase. With the increased importance of appearing in the top ad positions, advertisers will raise bids to show in those spaces. Even if they aren’t successful at breaking into those top positions, their increased bids will result in higher CPCs for the advertisers above them.
The emphasis on quality score will increase. Although many PPC campaign managers do already stress the importance of quality score, it will become even more prominent with this new change. With high quality scores you can compete for the top ad positions with a lower bid and pay less for clicks as well, counteracting the expected rise in costs.
We will see the return of the long-tail keyword. In line with the renewed emphasis on quality score, expect more long tail keywords to be a part of PPC strategy going forward. These died down somewhat with the advent of modified broad match, but now that it will be harder for advertisers to appear for more generic search terms, targeting very specific keywords is essential as there is less competition. Matching your ads and landing pages to these keywords will raise quality scores to affordably show for these searches.
More focus will be place on conversion and sales optimization. As Bryan Eisenberg put it best,
“It’s much easier to double your business by doubling your conversion rate than doubling your traffic.”
With CPCs on the rise, each visit to your website is more valuable and more important to get them to convert to a lead and eventually a sale. Conversion rate and sales optimization practices, like our Smart Selling program, can help businesses get more revenue from the website visits they generate.
Advertisers will turn to Bing Ads. If companies are unable to achieve profitability with their campaigns, they may turn to Bing Ads to acquire leads at an affordable rate. While we have seen great results with our Bing campaigns, it is difficult to make up for the sheer volume you get from advertising with Google.
It is important to note that Google has been actively testing this format for a while, so we likely have already seen some effect on our campaigns. The main takeaway now that this development is official is to focus on quality. This change will likely drive up costs, so improving quality scores to minimize what you pay and refining your conversion and sales processes to get the most out of your clicks is paramount to running profitable AdWords campaigns.
If you have any questions about this change or want a professional analysis of your account, fill out a contact form and our team will be happy to help you.
UPDATED FEB. 24, 2016
I’ve been following responses from other industry experts to this update over the past few days. Most seem to be of the mind that not much will change. I agree with some of their points – Google has been testing this format for a while so we’ve already felt some of the effects, and the large majority of clicks come from those top few spots.
But, I also disagree with some of their approaches and reasoning. Many of these articles approach the PPC industry as a whole, but as a client campaign manager, I can see this change greatly affecting certain clients with highly competitive keywords or in very saturated industries/markets.
I’ve seen some articles that analyze the past few days and report little change in CPC.
First of all, this is incredibly premature given that weekend traffic behaves differently and the new format hasn’t even been fully rolled out. I would expect that in the short term, competition and costs for the 3-4 position will increase, and long term, bidding wars could raise costs for higher ad positions as well. Historically, CPCs increase every year, so it may be difficult to fully attribute any rise caused by this update.
I also disagree with the idea that impressions won’t be affected. Yes, there will be more ads at the bottom of search results, but the value of below the fold impressions is not the same as those at the top of the page. For those that say Google will show more ads more often for searches, I would ask why they wouldn’t have done that previously.
Ultimately, only time will tell what effect this update will have. But given that Google has been running this test and collecting data for years, I don’t believe they would have made this change unless they believe that it will increase their revenue, either through higher CPCs or better CTRs for ads in the top positions.
The takeaway is still to improve the quality of your campaigns to affordably show in the top positions and optimize your entire sales process from impression -> click -> lead -> sale to get the most out of your PPC budget.
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