The biggest news hitting online advertising circles in the last few days (though notably absent from the Adwords blog itself) is that Google is removing something that has been present in Adwords since day 1 – right hand side ads.
Right hand side ads (traditionally ad positions 4 through to 8 on the Search Results page) were traditionally the bastion of advertisers who had tight Cost per Conversion/Acquisition limits – here on the right hand side, advertisers could bid low and know that even though they may not get click volume, they could get profit from these cheaper clicks.
Why would Google remove the ability for advertisers to execute this perfectly valid strategy?
As far as their corporate mantra is to do no evil, Google is absolutely a for profit company that now needs to answer not just to shareholders – but to the rise and rise of the incredible Facebook ad platform.
In addition, the accompanying rumour has been that there will be a fourth ad position introduced above organic search engine results (currently there are only 3 ad slots), essentially forcing users to scroll further down for organic SEO results, which will have a dampening effect on SEO and potentially be a carrot to lure advertisers to switch sides and focus efforts on paid advertising models rather than organic.
Because of Adwords’ underlying auction model, reducing ad positions (supply) for the same demand, plus factoring an overall dampening effect from SEO, can only point to one thing: rising click costs for advertisers / rising profits for Google.
How should Brands prepare for this?
As mentioned on earlier blog posts, advertisers will need to factor in that the days of Adwords being profitable on first click are coming to an end (if not already in your niche). Brands will need to factor in bidding higher – even to the point of losing profit on first click, in order to acquire the customer but make their money back over time.
In such an environment, the Brands that will win will be those that continually deliver the Best for the Least for the Most.
PS. The worst part of this news is that right hand side ads are almost the sole option for Google Grants advertisers. Because of the $2 CPC limit, nearly all Google Grants adwords ads are right hand side ads, so once an official announcement from Google goes live, we would welcome news on how the Google Grant could be changed to realistically work in the new environment. One would assume that the Google Grant CPC bid limit will be raised – fingers crossed.