Most analysts agree that Google Inc (NASDAQ:GOOG) will see a positive impact from its Enhanced Campaigns platform, but those at JPMorgan say it’s still a little early to see it. They had a conference call with Performics and RKG, two search engine marketing companies, on Friday. They said both companies saw solid growth in paid search spending so far this quarter with “modest acceleration” from levels in the third quarter.
Mobile still a big growth driver
They also reported that mobile is still the primary traffic growth driver, although it continues to weigh on overall cost per clicks because of the mix-shift toward smartphones. JPMorgan analyst Doug Anmuth and his team said they believe mobile will become even more important for Google Inc (NASDAQ:GOOG) as its Enhanced Campaigns offering ages.
Neither RKG nor Performics noted any kind of material impact on search spending from Google’s new platform, but they see scaling benefits because the platform enables advertisers to easily port their campaigns across multiple devices.
Benefits of Google’s Enhanced Campaigns
They believe that over time, this could “drive incremental advertisers and ad spend on mobile,” especially for small- to mid-sized businesses. Other benefits for Google’s Enhanced Campaigns platforms include better granular targeting capabilities according to location and time of the day. The JPMorgan team believes many advertisers are still in the early stages of adoption for this new platform.
They report that both of the two SEM companies they spoke with believe Google Inc (NASDAQ:GOOG) is also improving its analytics and back-end reporting for its ad features. Also they say tools like Estimated Conversions provide “a more holistic view of search spend across devices. Performics in particular reported that one of its clients saw 25% higher conversions through Estimated Conversions. RKG also reported that one of its clients saw a 17% increase in mobile conversions.
Google’s PLAs perform well
The JPMorgan team also reports that Google Inc (NASDAQ:GOOG)’s Product Listing Ads are also performing well. RKG told them adoption has been strong and that 40% of their search spending is on PLAs. That’s an 85% year over year increase for RKG’s clients. Performics clients’ PLA spending rose 30% year over year through the third quarter of this year, although analysts note that the firm saw a “heavy ramp” in the fourth quarter of last year.
Cost per click for PLAs has also gone up a bit. Advertisers are paying about the same for PLAs as they are for text ads. Previously, PLAs were priced at about a 10% to 15% discount compared to text ads. In spite of the price increase, the JPMorgan analysts think these ads are still attractive to retailers when compared to overall paid search because of the higher click-through rates and return on investment.
Google’s outlook is good
They said representatives from both SEM companies expect to see continued growth at Google Inc (NASDAQ:GOOG). Performics is projecting search spending growth in the low- to mid-teens in 2014, which would put next year in line with growth from this year. RKG is projecting 2014 growth just a little under the 20% level from this year.
Both SEM companies and JPMorgan analysts say mobile will probably still be the main growth driver next year. Performics and RKG also expect to see more focus on cross-device initiatives, retargeting and better use of data.
