This year mobile ad revenues are expected to ramp up to a total of $4 billion – a 36 percent increase over last year. As more and more people use smartphones, tablets, and high-speed connections, advertisers are in a land rush to reach as many mobile users as possible.
But many are not yet fully prepared to take advantage of this growth in mobile devices. Although cost- per-click (CPC) rates are lower compared to traditional desktop ads, higher bounce rates effectively nullify any advantage of lower CPCs – driving up the cost-per-acquisition (CPA) for many advertisers.
Google recently launched enhanced campaigns to improve the management of cross-device campaigns. Until now, SEM managers have had the freedom to choose on which devices their ads appear by setting device target options at the campaign level. But this is going away.
Under the current system, SEM managers have had the flexibility to create dedicated campaigns to target mobile devices to take advantage of lower CPC rates on mobile platforms. This provided the ability to optimize bids at the keyword level for each device type. One problem, however, is the additional management overhead of duplicating each campaign for each device you intend to target.
This approach was necessary in the past to maximize ROI because smartphones featured low-resolution screens and most websites rendered poorly on them. In the last couple of years, however, smartphones have been improved – offering more processing power, capacity and sophisticated browser capabilities.
Today, as we move into a multi-device world, those distinctions grow narrower every day – to the point where there is no distinction between how web pages are rendered on the desktop and on newer tablet browsers. Our analysis indicates that CPC and CPA rates are comparable between these two device segments for well-optimized campaigns.
Changes in the works
Google is planning to eliminate the ability to target campaigns for specific device types. Instead, ad campaigns will be served on all device types by default. Indeed, the only available option under the new model is to apply a bid adjustment factor (between -100% and 300%) for mobile devices.
You will no longer have the ability to create campaigns targeted for just smartphones anymore, nor will you be able to optimize bids at the keyword level for individual device types. On the other hand, this new strategy will increase competition for search ad slots in the mobile space and push CPCs closer to that on desktops.
Google is understandably under pressure from investors to reverse the trend of declining average CPCs – so this may be a very good initiative from Google’s perspective.
But what do these changes mean to advertisers? How do you take advantage of growth in mobile traffic without hurting CPA and conversion rates? Since it is no longer feasible to design campaigns targeted exclusively to mobile devices, what should be the bid multiplication factor for mobile on an Adwords campaign? What other best practices might you employ?
The case for customizing sites to mobile browsers
Most websites are designed for laptop and desktop users, so the browser experience on smaller screens can be substandard. It’s often time consuming and annoying to browse through pages rendered in multi-column formats and click on numerous links even on a 4.8-inch screen.
Based on a sample analysis of advertiser data on SearchForce, we found that many still don’t offer customized layouts for mobile users. For example, some sites use Adobe flash, which is not supported on tablets and smartphones. Our analysis reveals that not having a dedicated website for mobile platforms can seriously hinder your conversion rates and CPA.
Lets’ compare the relative performance of SEM campaigns for three different advertisers. Advertisers A and B offer dedicated layouts for mobile users. But advertiser C does not, yielding a suboptimal experience on smaller screens.
Mobile specific website: YES
Dedicated campaigns for tablets & smartphone
Mobile specific website: YES
Mobile specific website: NO
Note that there is not much of a statistically significant difference in average CPC between desktops and tablets, but CPCs can be up to 35 percent lower on smartphones. You can also see that conversion rates from smartphones are pretty close to that from desktops for advertisers A and B – and that the CPA is lower on mobile platforms as compared to desktops.
But advertiser C, with no mobile-specific landing pages, has a tough challenge in getting users to convert. In fact, the conversion rate is so low that the CPA is double that of desktop ads. That totally eliminates the advantage of the lower CPCs for smartphones and tablets.
That should show you the value of creating landing pages that are customized to the smaller screen sizes so you can engage those customers and prospects more effectively.
Best Practices for Mobile
At SearchForce, we believe advertisers should follow these best practices for mobile:
1) Optimize web pages for mobile devices: This is the single most important factor impacting your ROI. No matter how good your CPC and CTR, users will quickly bounce-off if your page takes too long to render or is too cumbersome to navigate.
The fact is, we now live in a multi-device world where search often starts on mobile devices and then moves to a larger screen during the lower end of the conversion funnel where the larger screen is often more convenient . You may be missing out on plenty of opportunities you may not be aware of if you deliver a suboptimal mobile experience.
2) Use cross-device analytics: Just because Google is deprecating device-targeting options doesn’t mean you should stop analyzing your campaign performance for each device type.
The first step is to decide which metrics matter most to you. Ask yourself: Are you optimizing for traffic or is the cost to convert each customer – no matter how they find you – most relevant? If you use a third party platform to manage campaigns, make sure you still can review the performance for each device type and quickly compare between them.
3) Apply bid adjustment factors: You will no longer be able to exclusively optimize performance on mobile devices by adjusting bids at keyword level. Instead, the only available option is to apply a bid adjustment at the campaign level for smartphones.
Our analysis suggests that average CPCs are about 35 percent lower on smartphones compared to desktops, but that could vary for your campaign. Does your campaign management platform offer suggestions on the optimal bid adjustment factor based on an algorithmic evaluation of bids against cost-per-conversion? Use the ratio of the average CPC between mobile and desktop as a starting point to set your bid multiplication factor for smartphones – but this should be adjusted to factor in CPA instead of solely based on CPCs.
Google’s changes will present challenges to some search advertisers, but by following these best practices you can better optimize your campaigns – embracing these changes without paying more.