Last week, Google announced a key change in the enhanced CPC that will impact marketing budgets and the targeting parameters. Before the change, bids would be adjusted by a margin of 30% depending on the likelihood of a conversion. With the changes, the 30% variance has all but gone. What this means is that a bid that would have cost AED 1.65 with the variance now has no cap on how much it could cost. The laws of demand and supply are taking effect on AdWords and Display, but not on the Google Shopping tool.
Marketers have a hard enough time getting Facebook targeting right, so this change spells short term panic. Particularly because enhanced CPC rates are device agnostic, failing to change the bid between mobile traffic and desktop traffic. Marketers must now place caps on their budgets with the 30% assumption if all else doesn’t change. This could result in a short-term jump in the cost of customer acquisition. Marketers must distinguish between campaigns that utilise enhanced CPC and those that do not. This is to avoid confluence of budgets. It also makes sure the budget of one is not swallowed by the other.
If your category performs better on one device against another, have adjustments ready for that particular high return device to compensate for it. Expect that in the short term, the algorithm overprices the pricing on a mobile bid due to Google’s agenda for a mobile-first world and also because intent to purchase is higher on mobile than desktop in developed markets.
In the short term, advertisers on the digital media buying side will need to monitor and micromanage budget spending to truly come to terms with the implications of these changes. Make note of the deviation between a bid and the cost per click. Adjust campaigns accordingly, and keep evaluating.
If the changes drive up the costs of customer acquisition for your category, consider experimenting with channels that extend customer lifetime value.
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