Google paid-ad costs could rise

Changes could boost competition for top positions

Changes could boost competition for top positions

Google removed text ads from the right side of its search results page. Observers expect stiffer competition for the top four ad positions.

Google has tweaked the layout of its desktop search results to match its mobile format, a change that could result in dealers paying more for paid search ads.

The tech giant removed text ads from the right side of the search results page, while boosting the number of paid ads appearing above the unpaid results to four from three. Overall, the maximum number of ads on the search results page was cut to seven from 11.

The impact of the changes, which were made in late February, could go beyond aesthetics. Observers expect the loss of right-side text ads to boost competition for the top four ad positions, which could lead to steeper prices for those search ads -- despite the additional slot.

It's possible, some say, that retailers could benefit from the changes in the long run. Those observers expect the quality of desktop traffic and click-through rates for ads to improve because of Google's modifications.

Reese: "It's still early."

So far, Dominion Dealer Solutions -- which in mid-March had more than a dozen paid search engine campaigns going for one of its dealer clients -- hasn't experienced any setbacks or seen pricing increase for search ads. "I think it's not a reason yet to panic. It's still early," said Brooke Reese, a search specialist for Dominion Dealer Solutions, of Norfolk, Va.

If costs for search ads rise but lead quality improves, retailers could be better off, says John Steerman, senior vice president of mobile, lead operations and product development for Autobytel, a third-party shopping site that was a pioneer in online retailing.

Steerman said Google's search results model is about showing consumers the most relevant ads possible. He says Autobytel, which spends seven figures each month on its search engine marketing, hasn't been hurt by Google's desktop layout changes.

"At this point, about half of our leads are being generated from mobile searches. As the traffic for everyone moves toward mobile, the impact of changes on desktop aren't going to be meaningful," Steerman said.

Still, showing fewer desktop ads likely will increase competition for the top four spots in Google's AdWords auction, which determines the ads in those coveted listings. When a user searches for a vehicle model, the first four results shown will likely be paid ads. To see the unpaid listings, the user must scroll down.

Unpaid vs. paid

Some dealerships could experience a drop-off in unpaid search traffic as a result of this layout change, said Amy Peck, director of managed marketing services for Dominion Dealer Solutions.

That would put an even greater emphasis on paid search, which can account for a significant portion of the traffic to dealer sites, said Gary Galloway, whose official title with Netsertive is automotive digital marketing evangelist.

Netsertive works with hundreds of dealers on various parts of the digital business. Galloway has seen dealer websites draw as much as 55 percent of their traffic from paid search.

Some marketers expect advertisers' jockeying for position to drive up prices in the months ahead.

"I'm anticipating that [retailers] will overcompensate a little bit, and we'll see more competitive bidding and therefore an increase in the cost of what we're paying," Peck said. "I think that will even out over time."

Options

If prices surge as Peck foresees, smaller dealerships with less money may fall behind in the search ad race. That could force some stores to re-evaluate their digital game plans, says Max Steckler, vice president of product management at CDK Global, a digital marketing company. CDK has an automated system that helps with the AdWords bidding process.

Steckler says Google's changes show the importance of dealerships having broad strategies that aren't too dependent on one platform.

"If everybody storms in, and everybody bumps their bid price 40 percent, I can tell you that Google is going to win, but the market isn't going to win nearly as much," Steckler said. "This is where dealers need to step back and think about their strategy. What are my other options? What other media can I buy to balance out this rising cost of Google?"

You can reach Vince Bond Jr. at vbond@crain.com. -- Follow Vince on

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Source: Google paid-ad costs could rise