AdWords Smartphone CPCs Drop Sharply After Enhanced Campaigns Transition [RKG Report]

google-adwords-square-logoWith two months of enhanced campaigns behind us, RKG’s Q3 Digital Marketing Report offers a look at the near-term impact of the roll-out on its client set, which includes 40 of the top 500 online retailers. Most metrics remained relatively stable; however, the effects were seen in smartphones where CPCs dropped significantly after the transition.

RKG transtioned most campaigns to enhanced in late June after refining changes to its in-house bidding technology. As the graph below shows, CPCs dropped dramatically after the transition. The agency offers two reasons for the huge drop: 1. bids were lowered in response to weaker ROI on smartphones 2. it became easier to target cheaper tail keywords on mobile.

Mobile CPCs versus Desktop Q3 2013

Google smartphone CPCs fell from 60 percent of desktop levels at the end of Q2 to between 30-40 percent today. As a result, smartphone spend share fell from 8.8 percent in Q2 to 6.4 percent in Q3.

Lower smartphone revenue-per-click (RPC) drove the reduction in mobile bids in Q3.  Smartphone RPC was 74 percent lower than desktops, compared to tablets which ran just 10 percent below desktops in Q3. Based on these disparities (illustrated in the graph below), RKG says that, even taking cross-device conversions into consideration, smartphone traffic was overvalued in Q2 with CPCs 50 to 60 percent of desktop.

Smartphone Revenue Per Click versus DesktopAs a result of the lower CPCs, some spend shifted back from smartphones to desktops in Q3. Desktop ad spend increased 10 percent year-over-year. Desktop clicks were off just 4 percent year-over-year in Q3, compared with an 8 percent year-over-year decline in Q2.

Still, the agency says with the lower CPCs and the ability to scale mobile keyword coverage, smartphone ROI improved in Q3.

There is much more covered in the report including performance by tablet and browser type, Bing Ads performance and organic and social trends. The complete report is available for download here.