Apple debuted the two new iPhone 6 models about a month ago with a launch that was surrounded by the usual hype, fanfare and trumped-up controversies that have become the norm for an Apple product release.
Given their larger sizes, the new iPhones may or may not bend a bit more easily than earlier models; but a more interesting question for paid search marketers is whether the more generous screen real estate of the iPhone 6, and particularly the iPhone 6 Plus, will alleviate some of the challenges users face with shopping on a smartphone, thereby driving up mobile conversion rates.
In the conversations I have with industry analysts about paid search trends, I’m often asked why smartphone cost-per-click (CPC) isn’t higher and what it will take for smartphone CPCs to reach parity with desktop CPCs.
While there are still significant challenges in assessing the full value of smartphone performance, including properly accounting for offline and cross-device conversions, the bottom line is that paid search advertisers (particularly e-commerce retailers) will need to see an improvement in online conversions from smartphones tracked through conventional means.
In the Q3 2014 RKG Digital Marketing Report released earlier this week, our team offers some updated stats showing that, although the revenue per click (RPC) produced by smartphones improved over the last year, there remains a large performance gap between smartphones and desktop.
Smartphone RPC was 66% lower than desktop in Q3, primarily due to lower conversion rates. A year earlier, smartphone RPC was 74% lower.
It’s tough to say with certainty, but most of that improvement can probably be tied to the transition to Google’s Enhanced Campaigns model and advertisers’ response to it.
Many sites opted to target a better smartphone return on investment at the time; and, along with Enhanced Campaigns making it easier to capture mobile long-tail traffic, they have seen smartphone RPC improve.
Looking at the CPC side of the equation, we see smartphone clicks running at about a 59% discount compared to desktop.
Advertisers are baking in findings on cross-device and offline conversions in their smartphone bidding, hence the smaller gap on CPC than RPC; but, it is clearly not moving the needle all that much. Why not?
Consider the cross-device data: we are finding that smartphones get a 17% lift in conversions from including cross-device estimates; but, desktops get a pretty decent lift as well, with a 6% increase:
If we give smartphones 17% more conversions, desktop 6% more, and adjust our revenue-per-click numbers from above accordingly, we find smartphone RPC still running 63% lower than desktop. In other words, the cross-device estimates close the RPC gap by about 3%.
How well the iPhone converts traffic is critically important to mobile paid search overall, simply because iPhones produce the lion’s share of smartphone paid search clicks. Again, in our Q3 report, we found the iPhone accounted for 63% of smartphone paid search clicks:
If that 63% of smartphone traffic started to convert even just 15% better than it does now, it would close the RPC gap between smartphones and desktop more than taking into account cross-device conversions.
The data on iPhone 6 conversion performance is still early, with the new models only representing about 6-8% of total iPhone traffic combined (and the 6 Plus representing just 1-2%); but, the results are encouraging:
We have found that iPhone 6 conversion rates are running 25-33% higher than conversion rates for earlier iPhone models. Revenue-per-click figures have been a little noisier due to the small data set, but they look very strong for the iPhone 6 Plus and not quite as good as the conversion rate lift for the iPhone 6.
As the marketing team for Samsung is eager to point out, the iPhone obviously isn’t the first smartphone with a screen size in the 5-inch range.
Samsung’s popular Galaxy S line moved to a 4.8” screen size (bigger than the 4.7” regular iPhone 6 screen) over two years ago with the Galaxy S III; and since then, the screens have only gotten larger.
Our data suggest that Galaxy S models represent about a third of Android paid search traffic, and there are plenty of other Android phones with screens larger than the older iPhone models; but overall, Android conversion performance has been consistently worse than the iPhone’s:
This doesn’t bode well for larger iPhone screens helping boost mobile conversion performance, but it may speak more to the overall demographics of the Android segment than anything else.
If we isolate the Galaxy S by itself, we see that it performs about as well as the older iPhones and produces a revenue-per-click that is about 25% better than the average across all other Android phones.
Still, looking at the RPC performance of Android tablets, there may be an upper limit in how well we can reasonably expect larger iPhones to convert traffic anytime soon.
Most Android tablets are a good deal bigger than even the iPhone 6 Plus (though they’re often smaller than the standard iPad Air) but they produce an RPC that is less than half that of desktop and only marginally better than today’s smartphones.
The reality is that we probably won’t have a very clear idea of the long-term impact Apple’s larger phones might have on mobile conversion rates and CPCs until at least next year. Smartphones and tablets tend to be popular holiday gifts, as we have historically seen a surge in mobile traffic following Christmas that largely ends up being sustained into the new year.
As the iPhone 6 models make their way into the hands of a broader group of users, there’s a very good chance that we will see their conversion rate advantage over earlier iPhones fade. We’ve observed this “early adopter effect’” a number of times in the past, most recently with Microsoft Surface tablets.
On the flipside, the upcoming launch of Apple Pay could help reduce friction in the online mobile checkout process, though it’s a bit of a wildcard at this point. It remains to be seen what kind of adoption rate there will be among e-commerce sites and along what timeframe. Apple also isn’t the first major player to try to change the mobile payments game; but, the simplicity of checking out with just a scan of a finger is an appealing notion.
So, don’t crank up those mobile modifiers just yet, but this is definitely worth keeping an eye on.
Special thanks to my colleague, RKG Senior Research Analyst Andy Taylor, for his help with this article.