Why Google’s cost-per-click drop might show that it’s ahead of the curve

Google’s Q3 earnings call saw its stock plummet nine percent as it announced profits and revenues that were lower than analyst’s bullish expectations. Larry Kim, Wordstream’s Founder and CTO, has been very busy pulling up some interesting Google Adwords stats which, he says, indicate that CPCs on its advertising platform have gone down:

I analyzed a billion dollars (USD) of paid search advertising and found:

* Q3 2012, the cost per click for google ads was going down a lot (-16.5% for google search and -18.2% for google display network in last 2 quarters);

* We also found that the number of available clicks were up like crazy. (+21.6% for Google Search, 29.1% for Google Display Network).

This is obviously great news for Google advertisers as this means they get more customers for less money. Google has intimated that the decrease in CPCs was due to an increase in cheaper mobile clicks. Business Insider meanwhile claims that some Google employees take the view that the company’s desktop business will soon be “an afterthought”.

Kim has also produced a neat infographic which highlights the differences in performance between Google’s Display Network and Facebook’s advertising platform, the highlights being:

In terms of advertising reach: Facebook reaches 51% of all internet users and serves up one-trillion ad impressions every month; while Google Ads (which comprise of Youtube, Gmail and Blogger — to name a few) reach 90% of all internet users and serve up 180-billion impressions every month.

Although Facebook doesn’t publish its CTR, analysts peg it at an average of 0.05%, which is 1/10 of the performance of Google’s Display Ads which have an average CTR of 0.4%.

Facebook’s ad formats (sponsored stories and text ads) are less in number and innovation than Google’s ads which comprise of YouTube video ads, in-game and in-app ads as well as their standard display image ads.

Kim adds that: “From an advertiser’s perspective, Facebook currently falls short in all five areas when compared to the Google Display Network.”

“To put it another way, Facebook (currently valued at half as much of Google’s entire business) offers advertisers less advertising value than what’s offered in the Google Display Network, which makes up just a quarter of Google’s total business, makes three times more revenue than Facebook and is growing faster, too.”

It’s evident that these internet behemoths thrive on advertising revenue, once Facebook realises this and ups its game with regards to mobile advertising and having different formats perhaps the numbers and engagement will look better; for now, it’s still the Google show.