AdWords generates the vast majority of Google's revenue. It is the system the runs Google's online ad business, selling search keywords to the highest bidder. So tinkering with the code of Google's golden goose isn't to be taken lightly.
But Google had to do something. Within a year or so, Google is expected to receive more search queries from mobile devices than it does from desktop computers. The problem is that mobile ads haven't performed as well as desktop ads. If Google's mobile search advertising revenue can't match its desktop search revenue, investors may lose faith in the company's future prospects.
During Google's Q4 2012 earnings call, CEO Larry Page was asked how long it would be before mobile cost-per-click (CPC) revenue matched desktop CPC revenue. He equivocated about whether desktop or mobile CPCs would ever be equal but at the same time insisted it wouldn't be a long-term problem, and stressed the advantages of mobile.
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"You already know location quite clearly, you can call somebody easily, you have a camera, you can hang out with the business, you can be notified instantly," said Page. "There're just a lot of things about mobile that are amazing opportunities for advertisers and for businesses. So I expect that to revolutionize how people do marketing and we are working hard on that."
Earlier in the call Page mentioned that Google engineers were working to simplify the company's ad system for advertisers, but he didn't have anything to announce at the time. Now, there is something to announce: AdWords Enhance Campaigns.
"Enhanced Campaigns represent the biggest single change to the basic structure of AdWords campaigns in the past 10 years," said Larry Kim, founder and CTO of WordStream, an online marketing company, in an email. "The new campaign structure will greatly simplify targeting and bidding for different devices and locations. It's a win-win for both Google and advertisers."
Surprisingly, given Page's insistence that Google strives to make products that are "beautiful, simple and easy to use," AdWords proved to be dauntingly complex when it came to creating mobile ad campaigns. As Kim explained in a phone interview, it was extremely difficult to create mobile-optimized campaigns because advertisers had to create different campaigns for every device and location. "It was such a pain that only about 1 in 20 advertisers when through the hassle of creating mobile-optimized campaigns," said Kim.
Google has some three million advertisers and 70% of them are small- and medium-size businesses, Kim estimates. But only the most sophisticated large advertisers were taking the trouble to craft mobile-specific campaigns in AdWords, he said.
In a blog post introducing the AdWords changes, Sridhar Ramaswamy, SVP of engineering at Google, acknowledged the issue by stating that the purpose of the revision was to help simplify ad campaign management.
"With enhanced campaigns, instead of having to cobble together and compare several separate campaigns, reports and ad extensions to do this, the pizza restaurant can easily manage all of this in one single place," Ramaswamy said. "Enhanced campaigns help you reach people with the right ads, based on their context like location, time of day and device type, across all devices without having to set up and manage several separate campaigns."
The AdWords update also improves advertisers' ability to track the effectiveness of mobile ads by identifying phone calls and app downloads as ad conversions. "If you're spending money on advertising, you'd like to be able to track the value of the dollars you're spending," said Kim.
By making it easier to create and measure mobile ad campaigns, Google is making it easier for advertisers to spend money. The company says it will make AdWords Enhanced Campaigns available to its advertisers in a few weeks.