Google advertisers who paid higher prices for Search Partner Network traffic in Q4 saw small gains, according to adMarketplace data.
In their Q4 2013 earnings call, Google reported that its owned and operated properties generated $10.5 billion in revenue, a 22% increase over Q4 2012, while its Search Partner Network (SPN) revenue only grew 3%, grossing $3.5 billion. This stagnant growth rate for Google Network revenue is consistent with a larger trend on Google’s $13 billion a year Search Partner Network. For the past year, growth on the Search Partner Network has been stagnant. Google reported 0% revenue growth for its Search Partner Network in Q3 2013, and 7% growth in Q2.
Like Google, adMarketplace operates a search publisher network. As such, many of our advertisers ask us to review their AdWords performance so that we can identify best practices for their paid search campaigns on our network. Our analysis of recent AdWords data suggests a reason for Google SPN’s stagnant growth: for advertisers, the value of SPN traffic did not rise in proportion to its cost.
We found that Google clients who boosted their spend by a combined 42% between Q4 2012 and Q4 2013 had to increase their CPCs by 33%, but their conversion rates only improved by 11%. Advertisers will pay higher rates if performance justifies the additional cost, but this was not the case. Essentially, advertisers who paid a lot more money per click received a few more clicks and only a small uptick in performance.
Google’s financials show most of its revenue growth comes from its owned and operated traffic, not its Search Partner Network. This is good for Google, who enjoys 100% margin on traffic from its own web properties but less than 35% margin from their Search Partner Network. On the other hand, Google advertisers who are willing to pay more for network traffic are not seeing improved results. Advertiser performance is stalling out on the Google partner network, which explains its flatlining growth.
- Adam J. Epstein. President & Chief Operating Officer, adMarketplace