Pay-per-click Advertising: 7 Predictions for 2013

2012 was a big year for pay-per-click advertising. Many online retailers saw their PPC budgets, conversion rates, and return-on-ad-spend grow nicely. At the same time, cost-per-click rates dropped precipitously for Product Listing Ads and mobile ads. Looking forward, here are my top seven predictions for PPC advertising in 2013.

1. Competition for PLAs on Google AdWords and Amazon will Skyrocket

Online retailers have been slow to jump on the Product Listing Ad bandwagon, which means that those who participate are able to pay artificially low cost-per-click fees relative to often less effective text-based ads. To illustrate the opportunity, we conducted an experiment where we uploaded a merchant’s entire product feed into a PLA campaign a few days ago (over Christmas) and set the maximum cost-per-click to a single penny. Several days later, the campaign generated 131 clicks, spending $1.31, and generating $242.70 in sales. On a percentage basis that return seems too good to be true. We’ve seen similarly astounding returns on campaigns with much larger budgets.

How long will cheap PLAs last? Not for long. 2013 will likely be the year that merchants jump on the PLA bandwagon. As they do, Amazon will likely expand access into its own product ads program to exploit the opportunity. Merchants who currently spend much time and money advertising on traditional comparison shopping engines will largely abandon them in favor of Google and Amazon.

2. Microsoft Will End its ‘Scroogle’ Campaign and Copy Google’s PLA Model

You may have noticed Microsoft’s “Scroogle” advertising campaign on television over the holidays. It takes Google to task for selling its shopping results to the highest bidder. If you haven’t heard of “Scroogle,” this CNET article recaps the campaign. Microsoft does have a point, but PLAs will become such a popular ad unit that Microsoft will abandon its Scroogle campaign and build a proper PLA program of its own.

Through Bing, Microsoft has a shopping program, but it is not nearly as advanced as Google’s, and participation is limited to a small number of “approved” merchants.

3. Google Will Launch Remarketing 3.0 and Microsoft Will Copy

Google did not invent remarketing. But once it became popular, Google took it to a new level by adopting it into its AdWords content network. Earlier this year, Google integrated its remarketing campaigns with Google Analytics, which as I addressed in “Remarketing Renaissance Helps Ecommerce Merchants.” In 2013 Google will take remarketing one step further by adding Dynamic Display Ads. This has implications beyond remarketing. But within the context of remarketing, advertisers will be able to guide potential shoppers through each stage of the buying funnel by targeting the right content, to the right user, at the right time. Bing, like it often does, will copy Google and will implement a retargeting program of its own.

4. Yahoo! Will Unveil New Cost-Per-Action Ad Units, Bypassing Microsoft

Earlier this year, Search Engine Land reported that Yahoo! introduced its first new ad format under Marissa Mayer. The unit, called cost-per-lead, enables advertisers to position ads within the search results that generate leads for advertisers on a cost-per-lead basis. The screen shot below, from Search Engine Land’s article, demonstrates this new ad format.

<img src="/wp-content/uploads/images/0005/5198/2013-predictions-1_lightbox.png" width="350" height="197" align="aligncenter" alt="Yahoo!'s new cost-per-lead unit. (Source: Search Engine Land.)”/>Yahoo!’s new cost-per-lead unit. (Source: Search Engine Land.)

Yahoo! certainly will not accelerate its revenue growth by relying on this new ad unit alone. So Yahoo! will likely release new self-service ad formats in 2013. Successfully launching lucrative new ad formats could make or break Mayer’s tenure at Yahoo!, so expect something big.

5. Facebook Will Create a Successful Online Shopping Marketplace

Facebook has no scalable monetization model akin to cost-per-click advertising through search engines. For Facebook to continue growing its revenues, however, it must find such a model. As a result, Facebook has experimented with ad models, such as allowing advertisers to prominently position stories in a user’s news feed. But ad units like that are not nearly as appealing to small business advertisers as search-based cost-per-click advertising. They can be a big turnoff to users as well.

One experiment that Facebook started in 2012 that may have promise, however, allows you to easily purchase and send gifts to friends on their birthdays. Facebook has tremendous insight into the various events of a person’s life, ranging from birth, to marriage, to death, and everything between. Accordingly, Facebook’s birthday gift feature will prove to be the opening salvo in a much greater ecommerce strategy.

Facebook will begin growing an ecommerce marketplace that makes it easy to purchase products for people in these networks as they achieve new milestones in their lives. Facebook will utilize its social graph to show buyers which items are the most popular choices for different types of recipients, and in this way, potentially disrupt ecommerce.

6. Google AdWords Will Become More Social

The growth of Google+ is unprecedented among social networks — if you believe Google’s claims. Google says over 400 million people have signed up for Google+, and claims more than 100 million of them are “active.” In 2013, I predict Google will begin incorporating what it knows about people, their interests, their networks, and their psychographics into segmentation options within AdWords.

Imagine being able to target ads to thought leaders, or to people whose hobbies indicate that they might spend a lot more money with you over time. Google has much of this data already, and it’s only a matter of time before it allows advertisers to begin using it to segment campaigns.

7. PPC Will Grow to 50 Percent of Traffic and Sales

This is my boldest prediction. I don’t think the question is whether PPC — both the search and content networks — will equal the organic search opportunity, but when. Conduct a search on Google from your phone or your desktop. You’ll see that most of your screen contains ads. Google’s investors demand large revenue-increases each year, and most of that revenue still comes from search ads. Each year Google must find new ways to increase search revenue. Often the easiest way to do that is to increase ad prominence in search results pages.

At the same time, Google is also making search ads more useful. PLAs are one example of the many new ad formats that bring useful content into ads, which make them stand out from traditional text links.

Ranking high organically will continue to be important. But advertisers that treat their paid search marketing as a top priority will find it much easier to grow sales.