The fact that people are shifting from searching for goods and services from their laptops to their smartphones – where ad prices are cheaper – is at the route of Google’s challenges.
Meanwhile, Microsoft’s problems stem from the shift in home computing away from the desktop to tablet devices, and so far its Windows 8-powered proposition in this sector – the Surface – is failing to ignite consumer passions in the way Apple’s iPad has done.
Although the company reported $19.9bn for the quarter ending 30 June, 2013, up 10 per cent.
However, it also recorded a $900m charge “related to Surface RT inventory adjustments” – an elaborate way of saying they have not sold as many units as previously anticipated – highlighting how the decline of the PC market is posing Microsoft with real problems.
Focusing on Google’s recent earnings, we can see it is also in no danger of going out of business any time soon. Revenues for the second quarter were up 19 per cent year on year in the second quarter totalling $14bn.
In an earnings call, Google CEO Larry Page referenced how “the shift from one screen to multiple creates tremendous opportunity for Google. With more devices, more information, and more activity online than ever.”
However, buried deep down among a plethora of numbers was the concerning news – for Google at least – its average cost-per-click (CPC) rate for ads served on Google sites fell 6 per cent year on year in the quarter, and approximately 2 per cent from Q1 2013.
This becomes all the more alarming when we remember that this is the seventh consecutive quarter that Google’s average CPC has fallen – a trend driven by the shift to mobile, where ad prices have historically been cheaper.
Of course, as Marketing Week documented earlier in the week Google is attempting to address this trend with its most fundamental change in its search advertising proposition AdWords with its Enhanced Campaigns roll out.
This move is regarded as a way of creating greater competition in AdWords auctions for mobile audiences, with Google effectively taking greater control over advertisers’ location targeting by automating how and where an ad appears. As we can see, this has yet to fully succeed in arresting the decline in CPC rates.
But we’ll have to reserve judgement on Enhanced Campaigns’ effectiveness for the next quarterly earnings call. Enhanced Campaigns haven’t been fully implemented just yet, but from this Monday (22 July) advertisers will have no other choice on how to book their ads.
Interestingly, a poll of 750 brand-side marketers by Marketing Week sister company eConsultancy found 56 per cent said they didn’t know what the impact of Enhanced Campaigns would be on their search strategy. A further 4 per cent said that it will have a negative effect. Clearly, confusion reigns in the market.
When we consider this, plus the fact that both Google and Microsoft – both of whom possess some of the world’s finest minds on all things tech and marketing – are struggling to transition to the “post-PC era”, as Steve Jobs called it, the vast majority of companies must ask themselves if they’re sufficiently set up for this (and future) revolutions in how people interact with the world around them. Marketers must heed this warning more than most.