Add People Review – 8 Reasons Why Google’s PPC is Getting Cheaper (or is it?).

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Manchester based digital marketing agency Add People reviews Google’s latest financial results and asks whether pay per click marketing is indeed getting cheaper for UK advertisers.

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Google's recent announcement that per click prices are getting cheaper doesn't mean UK advertisers will be getting a better deal soon.

Google’s Q2 results in 2012 showed that average pay per click advertising cost was down 16% compared to the same period last year, a trend described by analysts as a “recurring challenge” for the search engine giant.

But does this mean less cost and better returns for British advertisers? Here, Add People offer 8 key reasons behind this trend which explains why the declining price in ad words isn’t necessarily translating into the same for SME’s in the UK.

1.    Currency fluctuations

The relatively weak dollar has been explained for at least part of this trend by driving down the relative value of bids outside the US. But with the dollar showing signs of recovery over the past three months it seems ad words dollar prices will rally with it, boosting Google’s profitability in the process.

2.    Mobile PPC

According to figures published in UK marketing publication The Drum, mobile devices and tablets now account for nearly 10% of e-commerce in the UK. The mobile PPC market is still in its’ infancy, providing relatively cheap clicks for early adopters. As Google’s CFO Patrick Pichette explained, advertisers are still figuring out the value and potential returns from mobile advertising.

3.    Competition

While Google dominates the UK search engine market, Bing is making inroads in the US and Baidu have cornered the Chinese market, allowing more competition and choice in the world's two biggest economies which can only be good news for advertisers.

4.    Globalisation

While the global growth curve in internet usage continues, the largest, most affluent economies have matured, so a more even distribution of ad word clicks around the world will likely bring with it a lower unit click price trend as advertisers in smaller emerging economies grow.

5.    Display

Google has increased the number of advertising spaces available on the page over the last 12-18 months, allowing more advertisers to appear there for less. Good news for advertisers, but arguably not so good for consumers who are presented with an increasingly unclear array of choices on every search.

6.    Social media

The growth in social media and the importance in social signals provide competition to paid search advertising, thus keeping demand in check within mature ‘early adopter’ online markets.

7.    Savvy consumers

Consumer behaviour is undoubtedly having an effect, as users look for the best price advertised, not necessarily the top search result on the list.

8.    Savvy advertisers

Likewise advertisers are picking up on this shift in consumer behavior, and have come to realise that the key to a successful PPC strategy is not just about winning a bidding war - conversion and return on investment are the key metrics for success.

So, has Google’s financials revealed a downward trend in ad words prices? On a global level definitely but for reasons explained, a case of as you were for UK advertisers focused on UK markets.

However, at least some UK SME's can take heart from the fact that more opportunities for exposure and growing internet use in developing markets mean that better returns from pay per click marketing are most certainly possible.

Meanwhile, Google’s price per click trend provides a distinct logic behind their strategy to increasingly diversify their interests.

Add People is a digital marketing agency who have recently been included in New Media Age’s list of top 100 interactive agencies in 2012. They improve the efficiency of Google ad words campaigns for small and medium sized businesses across the world as well as offering search engine optimisation, web design and other internet marketing services.

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Neil Baker
Add People (Group) Ltd
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