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From the Wall Street Journal:

Google Shares Slide After Disappointing Results
Smaller-Than-Seen Earnings Increase Comes as Company Deals With Less Money Per Ad Click

Google Inc. GOOGL -4.98% posted a 3.2% increase in first-quarter net income amid a continuing decline in how much advertisers pay per click, as users shift to smartphones and tablets.
The Internet-search giant said revenue rose 19% to $15.42 billion. Analysts had projected revenue of $15.54 billion on that basis, according to Thomson Reuters.

Investors were disappointed by Google’s financial figures, sending its shares down 5% in after-hours trading. The stock finished 4 p.m. trading at $563.90, barely higher than the price at the beginning of 2014.

Google reported net income of $3.45 billion, or $5.04 per share, up from earnings in the year-earlier period of $3.35 billion, or $4.97 per share. The per-share figures are adjusted for the two-for-one stock split.

Excluding stock-based compensation and other items, Google said earnings were $6.27 per share, below the average analyst estimate of $6.41 a share, according to Thomson Reuters.

Advertising revenue was driven by more clicks on advertiser links next to Google’s search results, which increased 26% from the prior year. At the same time, the amount Google gets paid per click fell 9% compared with the prior year, continuing a trend as a higher percentage of searches occur on smartphones, where Google’s clicks are less valuable.

The smaller screens and limited bandwidth of smartphones make them a less-appealing tool than desktop computers for consumers looking to buy products or services online. Marketers that work with digital ad firm Rimm Kaufman Group paid about 60% less for smartphone clicks than desktop clicks in the first quarter in order to generate an equivalent payback.

Update: WSJ article extended here http://on.wsj.com/1qPjiog and in the print edition (4-17-2014)

RKG released its quarterly Digital Marketing Report on April 15, 2014 and was covered in Search Engine Land:
“RKG is out with its first quarter Digital Marketing Report today, showing US paid search spend increased 17 percent year-over-year…”
“Among RKG’s client set, Bing Product Ads and Google Product Listing Ads continue to drive most of the growth in paid search…”
“RKG reports that smartphone RPC, is making progress, however, rising from 23 percent of desktop in Q1 of last year to 34 percent in Q1 2014…”

To read the full article, click here.

April 15, 2014, Charlottesville, VARKG, a leading full-service digital marketing agency, released its Digital Marketing Report today, covering the first quarter of 2014. By analyzing data across its client base, which includes over 40 of the IR Top 500 Retailers, RKG’s report provides insight into trends for search, SEO, product listing ads, display advertising, social media, comparison shopping engines, and more.

The first quarter of 2014 saw continued growth across channels, as total paid search spend increased 17% from last year and organic search share stayed relatively constant. Mobile devices played a notable role in growth trends, while Product Listing Ads (PLAs) continue to drive paid search growth.

Mobiles Devices Now Account for One-Third of Search Traffic

While desktop visits for organic search are declining, mobile clicks in Q1 grew by 29% over this time last year. Mobile accounts for 33% of organic traffic on Google and 36% on Yahoo. And while mobile clicks contributed to just 16% of Bing organic traffic, this figure doubled from Q1 of 2013.

Paid search data shows similar trends. Smartphones and tablets each account for 18% of paid clicks, together contributing over a third of all search traffic. Comparing this quarter’s data to Q1 of last year, we see that smartphone clicks increased by 64%, while tablet clicks increased by 56%. Meanwhile, desktop traffic declined by 3% compared to this time last year.

Product Ads Now 50% of Non-Brand Google Search; Growing on Bing

Image-based product ads, including Google’s Product Listing Ads (PLAs) and Bing’s Product Ads, are greatly outpacing text ad growth in terms of both traffic and ad spend. While text ad spending rose by just 6% year-over-year on a 4% increase in clicks, product ads saw a 69% increase in ad spend and a 51% increase in click traffic from Q1 of 2013.

PLAs on Google recorded a 14% stronger ROI than text ads in Q1. While CPCs averaged 8% higher than text ads, conversion rates were 50% higher for the RKG client base, making PLAs attractive to both Google and advertisers. As a result, Google gave PLAs greater prominence in search rankings this quarter, resulting in further traffic gains. PLAs now account for 29% of all paid clicks on Google, and 50% of non-brand clicks.

Image-based product ads also made strides on Bing, whose product ad format came out of beta at the beginning of the quarter. Bing product ads accounted for 12% of non-brand revenue in Q1, compared to just 8% in Q4 of 2013. Even more promising, revenue per click (RPC) for Bing product ads is now 79% higher than comparable text ads, while in Q4 beta participants saw a RPC that was 22% lower than non-brand text ad levels. More »

Excerpts from MediaPost article:
“What will advertisements look like on wearable devices, and how will the auction model work, as Google plans to extend its Android operating system to support smartwatches and other wearable devices?…”
“Rimm-Kaufman Group scientist George Michie believes the devices will capitalize on local search marketing and advertising. He said the opportunities tie primarily to GPS and location-based signals. The technology applications already exist. Russian search engine Yandex owns one type that would work well in wearable devices. In fact, the company acquired it recently with the acquisition of KitLocate.

Michie believes content will become the ads for the small screen, serving up as wearers pass by the physical store. This will likely that mean opt-in services and frequency governors to prevent spam that would make these devices more annoying than useful. “I might give my device permission to push entertainment offers to me for a period of time, or dinner suggestions, or let it know that I’m interested in vacation ideas,” he said.”

Read the full article here: MediaPost

As posted on Google’s AdWords blog: “Last year, we introduced Shopping campaigns to a limited number of advertisers as a new, retail-centric way to manage and promote your products on Google. It allows you to browse your inventory directly in AdWords, streamlining how you organize, bid and report on your Product Listing Ads.”

See what RKG’s Director of CSEs and Feeds, Todd Bowman, as well as the test advertisers have to say about this development here: Shopping campaigns now available to all advertisers around the world

UPDATE: Todd Bowman speaks to MediaPost about Google’s Shopping Campaigns

Digital Bowl Assesses Search & Social Efforts of Super Bowl Advertisers
February 4, 2014, Charlottesville, VA – Leading search and digital marketing agency, RKG, today released its first Digital Bowl Report – evaluating the digital efforts of Super Bowl advertisers. Specifically, the report looks at social media, SEO and paid search, with Jaguar and H&M ranking in first and second position, respectively.

“Creating visibility for a brand is much more than breakthrough creative, high production value and $4 million for media. It’s about using all the marketing levers, in a thoughtful way, to ensure that your brand is discoverable and that you capture the buzz of a high profile event. The Super Bowl’s marketing winners and losers used to be determined subjectively as a creative assessment. No doubt creativity is critical. But so is people seeing and talking about your brand before and after the $4 million lights up the screen. Search, paid and organic, as well as social, and how these work together, determine the real business value of the efforts made in Super Bowl,” said George Gallate, CEO, RKG.
More »

Susquehanna Financial Group analysts Brian Nowak and Michael Costantini highlight the catalysts for positive advertising and earnings revisions for Google Inc (NASDAQ:GOOG) as they host a conference call with the RKG discussing the latest paid search trends. The edited transcript can be found here: ValueWalk/RKG Search Trends

RKG released its quarterly Digital Marketing Report on January 15, 2014, and the data is covered in Business Insider Australia:

“In the fourth quarter of 2013, smartphones and tablets combined for a 32% share of all paid search clicks, according to new data from Rimm-Kaufman Group (RKG)…”

Read the full article by clicking here.

“A series of meetings changed the course of the two companies, after discovering that all parties had a similar perspective on digital media.”  Read MediaPost’s take on RKG’s hiring of CEO George Gallate, former global chairman of Havas Worldwide Digital here: George Gallate joins RKG

New RKG Q4 Digital Marketing Report Reveals PLA Impact, Holiday Performance and Growth Trends

January 15, 2014, Charlottesville, VA – Leading search and digital marketing agency, RKG, today released its Digital Marketing Report for the fourth quarter of 2013 – showing digital trends for paid search, SEO, social media, product listing ads (PLAs), display advertising, comparison shopping engine management, mobile and a special section on holiday performance. Across its client base, which includes over 40 of the IR Top 500 retailers, RKG found that search spending growth on Google increased slightly to 19% year-over-year. This growth was driven primarily by traffic increases as average cost-per-click (CPC) was up just 3% year over year in Q4.

Google PLAs played a key role in holiday performance, accounting for 23% of all Google traffic and 42% of competitive Google traffic, which excludes clicks on keywords that include a site’s own brand name. By comparison, the newly minted Bing Product Ads format, which launched in Q3 as a closed beta, accounted for 7% of Bing competitive ad spend. Based on PLA success on Google, that figure is likely to rise quickly.

Compared to another similar ad format in Amazon Product Ads, Google PLAs sales volume was nine times larger among advertisers running on both platforms.

On the whole, PLA spend increased 72% year-over-year as Q4 CPC for the format surpassed those of competitive text ads for the first time, coming in 13% higher. Competition in the PLA space will likely continue to drive up CPCs as return on investment for PLAs outpaced comparable Google text ads by 18%.

Continued Growth of Mobile

The volume of smartphone and tablet searches continued to grow through the holidays, and traffic on these devices accounted for over 25% of paid search spend in Q4. Thanksgiving and Christmas Day were the largest mobile days by share of traffic in Q4 at 43% and 45% respectively, as those traveling during these holidays were probably more likely to pack only mobile devices. Eagerness for Black Friday deals may have also played a significant role on Thanksgiving, while searches by those receiving new mobile devices for Christmas may have contributed to the increase in mobile share on that day.

While Q4 smartphone click traffic more than doubled year-over-year, CPC was down 8% – continuing the trend from Q3 due to the transition to the Enhanced Campaign model. Enhanced Campaigns’ mobile modifiers gave advertisers greater control to hit more demanding efficiency goals on mobile devices, which have historically returned much lower revenue-per-click than desktop and tablet computers.

Mobile now accounts for a greater share of PLA traffic than Google text ad traffic, indicating that advertisers and consumers are already largely taking advantage of the product ad format on mobile devices.

The full RKG Digital Marketing Report offers over 40 charts with additional insights and analysis on paid search, search engine optimization (SEO), social media, comparison shopping engines, attribution and more. More »