Google is constantly maintaining a healthy tension in its search engine results page (SERP) real estate between more ad space and less ad space. More ad space means more opportunities for advertisers to reach out to their audiences, while less ad space allows for a cleaner, less cluttered user experience.
The latest set of changes Google made, back in February 2016, aimed to address this tension. Google updated the SERP display by removing standard text ads from the right rail and increasing the number of text ads above the organic results to four (up from the previous maximum of three) for certain “highly commercial” queries. This change only applied to the desktop SERPs.
Overall, how does the change impact the market?
It appears that advertisers are spending the same amount of budget for the same volume of clicks. The top ad positions are costing a bit more — no surprise here.
For smaller advertisers who have relied on lower-volume, long-tail terms, the change will cause problems. It will cost them more to attain a top position, and they will see fewer impressions and clicks for the cheaper lower positions. Their overall volume will decline.
In general, the changes continue to push search marketing to a more complex and competitive environment. The ability to manage campaigns manually is becoming much more difficult — the need for machine learning aligned with granular data is becoming the standard (much like automated trading on the stock exchanges).
The change is good: Less clutter and more relevant ads is a good thing. Advertisers will only pay for placements that produce results, which means consumers are getting value from the ads.
Current results should show a slight increase in revenue — granted, this is from the POV of Adobe’s search data. The offsets between fewer impressions, higher CTR and the shift in CPCs across positions give the indication that Google has made a good change.
(Further, we have not looked yet at the impact to PLA placements, which remain in the right rail. We could see a higher performance there with a cleaner right rail.)
What do the data say?
Let’s dig into the data a bit.
The question advertisers had on their minds was whether these changes would lead to fewer consumers clicking on the ads.
On the one hand, the argument was that by showing fewer ads, users would experience fewer ad impressions — and thus, advertisers would not be able to spend their budgets effectively. On the other hand, the argument was that by showing fewer ads, only the most relevant ads would be shown. In response, consumers would click on more impressions, even as the total number of impressions would be less than before.
After almost three months, we here at Adobe have developed some initial findings by looking at aggregated/anonymous data from our search advertising customers. Overall, the change seems to have had a positive impact for most advertisers/consumers and will likely result in a slight increase to Google’s business. Let’s explain why this is.
As we expected, the total impression volume has dropped by 10 percent in the US. Fewer ads displayed equals fewer ad impressions. The absence of right rail ads, combined with the fact that Google does not always display an ad in the fourth position, has caused a significant shift in advertiser behavior by forcing them to advertise on second and third positions.
Now, the big question: How has this new SERP display altered click-through rates, CPCs and overall performance?
Click-through rates changed in positions 1, 3 and 4 in the US, while position 2 was unchanged.
- Position 1: +13 percent
- Position 2: unchanged
- Position 3: +2 percent
- Position 4: +18 percent
Note that a higher click-through rate means that on average, consumers are more likely to click on an ad when they see one. This, we believe, is because with fewer ads, consumers are faced with fewer choices and are more likely to click on the available options.
CPCs increased slightly for positions 1 and 2 but fell for positions 3 and 4.
Based on the shift in positions we have seen, we believe advertisers are placing a higher value on the top two positions, and they’re more competitive than positions 3 and 4. As we see the new layout become familiar, this could change.
- Position 1: + 6 percent
- Position 2: + 7 percent
- Position 3: -10 percent
- Position 4: -8 percent
As for ad performance for advertisers, we need more time to determine a conclusive result, as users are still adjusting their purchasing behavior to the new ad formats.