Increases in Paid Search Competition & Cost Per Click in the Post-Right Rail Era

Since news hit that Google was going to eliminate paid search text ads from the right rail of its results page on February 22, the industry has been abuzz with speculation on exactly what those changes may mean for advertisers.

To help provide some preliminary answers to this question at this early date, AdGooroo examined changes in the number of advertisers and cost per click on 2500 top retail keywords from February 1 through February 18 compared to the period from February 19 (the day we started seeing significant changes on Google’s right rail) through March 8.

For the 2500 retail keywords we examined, on average the number of advertisers decreased by 78%, from 38 advertisers to 22 advertisers. However, the change in average cost per click across all 2500 retail keywords was not as significant—just a 1.8% increase, from $1.63 to $1.66.

A Closer Look

To gain some additional insight, we also took a closer look at changes in the number of advertisers and cost per click from February 1-18 to February 19-March 8 for 20 of the top retail keywords by paid search spend.

Paid Search
In terms of competition, the number of advertisers on the 20 top keywords decreased by an average of 27%, which is still significant, but far less than the 78% decrease we found across all 2500 retail keywords.

To help illustrate the effect that Google’s elimination of right rail ads has had, the following chart shows the overall increase in average position for the top-spending advertisers on the term ‘prom dresses’, perennially one of the top retail keywords by paid search spend. Notably, two advertisers, JCPenney and Asos, dropped off after February 21, the last day Google had right rail ads.

Paid Search

Changes in Cost Per Click Vary Greatly

More revealing are the changes in cost per click. On average the 20 top retail keywords we examined experienced a 7% increase in cost per click after Google’s elimination of the right rail ads, which is indeed higher than the 1.8% average increase in CPC we saw on the entire group of 2500 retail keywords.

However, changes in cost per click varied greatly among those 20 retail keywords. The term ‘samsung galaxy s6’, for instance, experienced a 108% increase in cost per click, going from an average of $1.59 from February 1-18 to an average of $3.31 from February 19-March 8. Cost per click increased by double digits for 6 other keywords, including ‘laptop’ (+36%), ‘mattress’ (+32%) and ‘furniture stores’ (+15%), while 7 other keywords increased in cost per click by only single digits.

Perhaps most notable, 6 of the 20 top retail keywords we examined actually decreased in cost per click after Google cut ads from the rail. Those include both branded and generic keywords, including ‘mobile phone’ (-26%), ‘macbook pro’ (-20%), ‘fitbit’ (-16%), and ‘shoes’ (-14%).

A Case By Case Basis

Over the long run, we may yet see that many search advertisers’ initial concerns will be realized, that cost per click on Google AdWords will increase more significantly across all keywords due to simple supply and demand. However, that hasn’t happened yet.

What the findings of AdGooroo’s initial study mean for paid search marketers is that it’s now more important than ever to stay on top of the situation and examine your keywords on a case-by-case basis to determine how your cost per click has been affected. This is especially important for your top-performing terms, i.e., the keywords that are driving the highest and most profitable traffic to your site.

View the original article from AdGooroo

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