Google Inc (GOOG) ECs To Have Minimal Impact In 3Q

Google Inc (NASDAQ:GOOG)’s Enhanced Campaign (ECs) has been studied by JP Morgan analysts, who believe “some choppiness” has been apparent around the EC transition, though overall search budgets appear stable for the third quarter. According to analysts Doug Anmuth, Bo Nam, Kaizad Gotla and Diana R Kluger,  “choppiness” has been particularly visible around mobile bids and CPCs.Google Inc (GOOG) ECs To Have Minimal Impact In 3Q

More impact in coming quarters

Analysts say that, during the early days of the transition, some of the advertisers (mainly in retail vertical) lowered their mobile bids to keep a check on their respective mobile strategies and ROI. Based on the SEM checks, analysts say that some of the advertisers may have targeted a mobile multiplier of -100 percent primarily to reassess their mobile strategies in order to prevent ROI and overspending on CPCs. This, as per analysts, is the primary reason why the CPC did not increase as was expected. However, by the end of August, a “natural” increase was witnessed in the mobile pricing, since ECs went into effect in late July.

The SEM checks made by the analysts indicate that ECs have not changed the search spending in the quarter. Analysts believe there is a significant focus on the impact to CPCs, and that in coming time more mobile advertisers will boost the bidding environment. Also, “bid adjustments” surrounding the devices, location, and time of the day will enhance advertiser target ability, which will eventually translate in higher overall ROI and ad spending.

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Based on the checks, analysts hold that advertisers are still not fully used to Google Inc (NASDAQ:GOOG)’s EC bid modifiers, and more impact will be seen in the coming quarters.

Google added new features in ECs

To up the sophistication of the bidding platform, Google Inc (NASDAQ:GOOG) has added many features in Enhanced Campaigns. According to analysts, “ECs help rebuild the AdWords platform for a multi-device future,” as all the devices are combined into a single campaign, which increases the scale to include future devices also, like Google Glass or smarwtatches.

Analysts believe that investors, as of now, do not look very optimistic about EC transition. However, by the year end, analysts expect a good run, as by then smartphones and tablets will account for 15 percent of eCommerce, thus presenting a good opportunity for retailers in the rapidly growing segment.

For the third quarter, analysts expect net revenues for Google Inc (NASDAQ:GOOG) at $11.6 billion, which is in line with the consensus. The revenue estimate is mainly driven by 21.5 percent year over year growth in paid click and a 5.2 percent decline in CPC.