Google’s Enhanced Campaigns Better In Long Term

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Google Inc (NASDAQ:GOOG) completed the migration to its Enhanced Campaigns, and there’s been plenty of positive feedback from analysts about the new platform. However, it doesn’t look like the search giant is receiving a lot of benefit from the migration just yet. Wedbush analysts say data from Performics and Rimm Kaufman suggests that Enhanced Campaigns so far “have been generally non-additive” to Google’s third quarter results.

Google's Enhanced Campaigns Better In Long Term

Google sending mixed signals

In fact, the migration to Enhanced Campaigns, plus share gains by Yahoo! Inc. (NASDAQ:YHOO) and Bing, appear to be responsible for the mixed signals in the search giant’s recent results. They said at this point, Enhanced Campaigns doesn’t appear to be adding anything to Google’s earnings.

Analysts Shyam Patil and James Dix say the benefit Google Inc (NASDAQ:GOOG) receives from Enhanced Campaigns will likely be long term rather than immediate. They said the long term benefits will likely be because of improved efficiencies and new areas of spending which are available to advertisers, like geo-targeting and mobile offers.

Before and after Google’s EC migration

Performics compared the 20 days before and after Google Inc (NASDAQ:GOOG) migrated to the Enhanced Campaigns platform. The firm found that cost per clicks for desktop searchers were up 4 percent, while tablets fell 4 percent. Cost per clicks for smartphone searches fell 7 percent. The firm believes the unexpected drop in cost per clicks on tablets and smartphones is due to more emphasis on mobile strategies and efficiencies by advertisers.

RKG also noted a decline in smartphone cost per clicks to 40 percent of desktop cost per clicks, compared to between 55 and 60 percent before the migration to Enhanced Campaigns. The firm said tablet cost per clicks was still similar to desktop cost per clicks, just as it was before to the migration. In the long term, both Performics and RKG believe the gap between cost per clicks for smartphones and desktop and tablets will narrow.

General trends within the paid search industry

The analysts also noted that Google Shopping product listing ads also don’t appear to be contributing much incrementally to overall paid search spending. Instead, the money for these ads appears to be coming out of existing paid search budgets. According to RKG, product listing ads made up 33 percent of spending on Google Inc (NASDAQ:GOOG), compared to about 28 percent in the second quarter.

Also costs per click for these ads are 10 to 20 percent lower than the text-based cost per click. Performics found that product listing ads increased to about 4.6 percent of overall Google spend, compared to 1.4 percent in the second quarter of the year. Product listing ads are actually at a 60 to 80 percent premium to text-based costs per click.

Wedbush analysts remain Neutral on Google with a $860 per share price target.

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