Google’s Announcements – A Different Perspective

Like most of you, I was seriously anticipating Google’s big announcements yesterday – mostly because they had hyped it as being something so major. Watching the live stream while engaging in real time reaction and comments with my #PPCchat brothers and sisters was wild, crazy and a whole lot of fun!

Others have summarized and broken down the actual announcements themselves, which ranged from “whatever” to “pretty cool”. I’d like to concentrate more on what I think the larger theme of these announcements indicates, as others have broken down the specifics so well.

So What Is the Bottom Line?

Well, that’s just it – it is all about the bottom line. Google released their Q1 Earnings Report last week and their stock price took a hit because instead of hitting the analysts target of $15.54 billion in revenue, they only earned $15.4 billion. Just think about that for a hot second. That is a difference of 0.9% and it caused their stock price to drop 5%. Nevermind that their revenue was up 19% from Q1 of 2103, it missed analysts’ revenue and profitability estimates, so the stock value fell. You can read a quick and non-technical summary of the earnings report at Time Magazine.

If you look a little deeper into their earnings report – I know, this is not the most sexy topic, but it has bearing on AdWords and therefore, on our livelihoods, so bear with me a little more…

Yahoo Finance has a transcript of the investor conference call and one piece in particular stood out to me after yesterday’s announcements (emphasis mine).

From Patrick Pichette – Google SVP and CFO:

Finally, Google’s other revenue grew 48% year-over-year to $1.6 billion and was down 6% quarter-over-quarter. Digital sales of apps and content in our Play Store drove year-over-year growth. Chromecast sales were also strong.

Kind of makes the grandiose presentation section about Apps make more sense, doesn’t it? Google needs revenue growth, year over year and quarter to quarter. It has also been widely reported that CPCs for ads have been steadily falling (see the Time link for a quick stat). So, growth and revenue needs to start coming from somewhere else.

How Does This Relate to the Announced New or Improved Features?

Looking at yesterday’s announcements through the lens of potential revenue growth for Google is, in my view, the most practical perspective. I think the changes fall into three categories:

  1. Lowering the barriers for increased AdWords participation and spending
  2. Reinforcing the idea that AdWords does not require professional management
  3. Good for Google & quick revenue booster

Lowering Barriers

It seems clear that since CPC figures are at best flat, that the only way to increase overall revenue is to add customers or increase the spending of existing customers. The changes that fall into this category are:

  1. Draft & Experiment mode – encourages application of “Opportunities” to the account (which are often better for Google than the advertiser).
  2. Bulk Updates – removes potential barrier to entry or expansion of campaigns by making larger changes faster and easier to implement.
  3. Automated Bidding – increases perception that you can “set it and forget it” and Google will take care of wisely managing your spend for maximum ROI.

Lessening the Need for PPC Pros

The announcements were definitely aimed at non-agency or in-house advertisers, which Google views as their growth target market, in my opinion. Built on the theme that you don’t really need expert help to run super successful AdWords campaigns:

  1. Draft & Experiment mode – you can try out your own ideas before taking them live, you don’t need professional management.
  2. Bulk Updates – you can upload stuff from spreadsheets now into the interface.
  3. Automated Bidding – it’s automated, need I say more?
  4. More Sophisticated Reporting – you don’t need a fancy PPC professional to extract detailed performance data.

Google Revenue Boosters

As mentioned above, it is all about increasing revenue:

  1. Greater Ability for In App Linking – note the presentation referred repeatedly to the Google Play network and was very vague about when or if this capability might be extended to iOS apps.
  2. Draft Mode & Experiments – anything to get advertisers to make changes or expand campaigns that result in more money spent.
  3. Automated Bidding – relinquish control over bids = more revenue.
  4. More Sophisticated Reporting – if they can bring about diminished use of third party tools, advertisers will be relying on Google for both data and other automated functions. Unlike third party tools, which do not have a direct interest in your total ad spend, Google does.

Now before you ask me how my tin foil hat is fitting today, let me be clear – I do not begrudge Google for any of this. It is smart business and as a business owner I completely get that and support them doing what they need to do to be successful. And really, Google does not care what anyone outside of analysts and investors think. The system is set up that way. So, like it or not, they will continue to make decisions that help them to meet and/or exceed their earnings expectations. It really is that simple.

If we all keep this in mind, and don’t take these things personally, life will be a lot smoother. Remembering that Google makes decisions to foster their growth and not to screw any one segment, also helps keep things in perspective. That is not to say that they don’t stick it to different groups and industries from time to time, but I do not believe that is their primary goal – it is usually more a case of either unintended (we hope) consequences or collateral damage.

Personally, I’m interested in trying out the drafts and experiments and checking out the new reporting tools. Hopefully they will be available soon!

 

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