In an odd and unexpected way, Google’s earnings were shared to the Securities and Exchange Commission (SEC) earlier than planned. The slip resulted in Google shares falling 9 percent, or $68 a share, before trading was halted. Despite a 33-percent rise in clicks on mobile devices, the overall cost per click paid by advertisers decreased by 15 percent. Google quickly addressed the declining revenue from mobile, stating to analyst that it was prepared for challenges with mobile and already shifting its strategy.
Justification for Facebook Struggles
Similar to Facebook and others, Google is discovering that unlocking the success to mobile ad revenue is not as easy as first thought. Many have been quick to criticize Facebook’s lack of success with mobile ad revenue, but this latest news from Google is justification for the complexity of mobile ad revenue success. Sure, Google is dealing with losses from its acquisition of Motorola Mobility, but that represents only $527 million of the loss. With 55 percent of the mobile ad revenue market share, why is Google still struggling to take advantage of the clicks from mobile devices?
Not All Clicks are Equal
According to Marin Software, people are nearly two times more likely to click on an ad on their smartphone vs. their desktop. The question is: What is the value of those mobile clicks? If we look at it from a pure e-commerce view, we know from Marin’s study that conversions from smartphones are only 2 percent of clicks, while desktops are 4 percent. If we take the view of local lead generation, a mobile click is much more valuable. But here within lies the conundrum: How do we connect revenue to that the local lead?
Is this the Sign of the Decline of Google?
Based on these results, are we starting to see signs of diminishing returns from Google? Absolutely not! Google has invested a great deal into mobile and ad revenue generation. If anything, this is a sign that Google is ready to get serious and raise the bar. Keeping things in perspective, Google still generated more than $2 billion in revenue last quarter. And search (mobile included) is still showing strong growth year-over-year. This recent blip doesn’t signal a time to panic; it simply demonstrates Google’s need to adjust its mobile strategy and find dry land while Facebook is still lost at sea.