Google Enhances AdWords, Possibly Correcting Mobile Ad Rates

Changes enable more agile bidding, creative, measurement

During Google’s earnings call last month, CEO Larry Page said he’s not sure when the company's mobile ad rates will equate with its desktop ad rates—or if they will ever even find an equilibrium, Page even suggested that one segment could always be bigger than the other, though he wasn’t sure which.

Despite that talk Google may have found a way to correct mobile ad rates some consider undervalued.

On Wednesday, Google is announcing changes to AdWords designed to make advertisers’ campaigns effective no matter where or when a consumer sees them or on what device. Collectively called Enhanced Campaigns, the changes will apply to three categories: bidding, creative and measurement. Enhanced Campaigns will roll out over the next few weeks, spreading to all AdWords campaigns in mid-2013.

Google svp of engineering Sridhar Ramaswamy explained that the changes are in response to the current constantly-connected world where users always have some kind of device at the ready to search, and that the lines delineating devices are rapidly blurring. “When we built AdWords 10-plus years ago, we didn’t have to consider these things,” he said. Ramaswamy’s team met with large and small advertisers to pick their brains on the problem and came away from those discussions thinking of the constantly connected multi screen world as huge opportunity that “presents significant problems for marketers because they have to do things like split out campaigns or adjust bidding,” he said.

“They were hampered by how hard it was to do that," Ramaswamy said. "The ‘aha moment’ was all about context.”

At a concrete level, context means the ability for advertisers to adjust their campaigns to take advantage of the situation a consumer encounters a particular ad. Now advertisers can set their adjust their bid strategies to take into account  what device a person is using, where that person is and what time of day it is. For example, a restaurant could set a base price it is willing to pay per click but set parameters such that the bid could increase by 25 percent if the ad would be served to someone on a smartphone within a given radius of its location during lunchtime. Conversely, that restaurant could set its bids 30 percent lower if served to someone on a desktop computer in the same zip code but in that awkward post-lunch/pre-dinner window.

Advertisers are able to set time windows by 15 minute increments, Ramaswamy said, whereas devices can specified as either smartphones or desktops/tablets and location can be city, zip code or within a specific radius to a location. In the future, Google is considering adding semantic location targeting, so that an advertiser could target users when at the airport or mall, for example, he said, before acknowledging that Google would have to clear up any privacy concerns beforehand.

The new bid adjustment capabilities could set aside any setbacks Google may have in equalizing mobile cost-per-click rates with desktop CPCs, something that plagued Google ahead of its third-quarter earnings call leading to criticisms that Google was struggling to monetize mobile users. Assuming most advertisers adopt Enhanced Campaigns as a single mechanism to run their AdWords campaigns after Google completes the roll-out, the base bid prices those advertisers set and the adjustments they allow for could create new standard ad rates—rates that in theory would be closely tied to a user’s likelihood to convert, in theory erasing any artificial reasons for undervalued mobile CPCs compared to desktop prices. That shift would be bolstered by Google’s move last year to integrate AdWords with its AdMob mobile ad network of 300,000-plus mobile apps.

For example, a restaurant could estimate that its more worthwhile for someone to see its ad on their smartphone when nearby than someone holed up in an office in the same town; there’s less friction in getting the on-the-go consumer to step in and order. The restaurant could then set a $1.00 base CPC for search queries including the keyword “lunch” but adjust its bid to be placed 50 percent higher for a mobile searcher within a mile of its location and 25 percent lower for a desktop searcher in the same city. That could lead advertisers to overvalue mobile ads and price them too high.

To keep things in check, the restaurant would need bidding competition from a pizza restaurant that prioritizes the desktop user because it makes more money from deliveries but still want to attract from passersby who may order take-out. AdWords’ auction model that rewards the winning bidder with a CPC closer to the second-highest bidding advertiser’s price could cancel out any inflation. Therefore Enhanced Campaigns would need broad adoption so advertisers don’t swindle themselves.

On the flip side, the AdWords changes could force the shift regardless and in Google’s favor. Advertisers can’t explicitly opt to only run campaigns on mobile or on desktop/tablets and set a base bid price specific to either channel. The base bid is specific only to the keyword, and the advertisers must tweak the bid adjustment parameters if they want to skew towards one channel over the other.

“We think it’s important for marketers to be present and relevant across all devices, but if a marketer chooses, they can tweak the bids to control which devices their ads run on,” Google said.

An advertiser that wants to run an AdWords campaign only on desktop and tablets would need to set their mobile bid adjustment at 100 percent lower than the base bid; an advertiser significantly preferring mobile to desktop/tablets can set the mobile bid adjustment at 300 percent higher, the company explained.

Beyond bids, ad content can also be automatically adjusted on the fly. An advertiser can upload its creative assets to best apply to a user’s context, with a campaign cycling through different ad text, site links or apps or extensions. A retailer may want to present a click-to-call button to a smartphone user in a brick-and-mortar store’s vicinity, but a link to download its e-commerce app to a smartphone user miles away from a physical store; a desktop user miles away might see an ad promoting an online sale.

With all the new granular capabilities Google is rolling out, AdWords is also adding more specific measurements so that advertisers can track calls and app downloads. Those categories can be grouped as conversions with other metrics and also displayed as separate columns in the AdWords reports advertisers can access, letting them see how much a call was worth compared to a site visit, Ramaswamy said. Eventually Google would look to add sequential measurement to let an advertiser see that someone saw an ad on one device but converted on another and attribute each accordingly, he said.

“Our theme here is that the consumers have already shifted their mindsets in looking at their devices as interchangeable. They don’t go to a tablet thinking they’ll get tablet results. We want to give advertisers a chance to think the same way and not in terms of devices but how and when to reach my consumers,” said Ramaswamy.