Google Q3 Earnings Disappoint, but AdWords Cash Cow Stronger than Ever, Finds WordStream
BOSTON (October 25, 2012) – Following Google’s announcement of its third-quarter earnings last week, WordStream Inc., a provider of search marketing software and solutions, has released the most comprehensive analysis ever of the economics of Google’s AdWords advertising platform, which results in over $100 million in revenue for Google every day. Google reported advertising revenues of $10.8 billion for the quarter. Results were lower than expected and considered “disappointing” by Wall Street analysts, but WordStream’s report reveals the changing economics of Google’s pay-per-click search advertising machine. Although average click-through rate (CTR) and cost per click (CPC) were mixed, overall impressions and clicks increased, leading to a 16 percent growth in advertising revenues over the previous year.
WordStream released an infographic with detailed statistics on Google’s advertising model, including key metrics such as average CTR, CPC, and conversion rates for the top 10 industries that spend the most on Google advertising.
Summary of Results
WordStream’s top-level findings on Google’s key advertising metrics in Q3 include:
- Google makes over $100 million per day via AdWords search and display advertising, resulting in total advertising revenues of $10.8 billion in Q3.
- Google search ads had 5.5 billion impressions per day in Q3. The Google Display Network had 25.6 billion impressions per day.
- Average click-through rate in Q3 on Google search was 3.5 percent, resulting in over 192 million clicks per day. CTR on the Display Network was 0.18 percent, resulting in 45.8 million clicks or calls per day. These figures are down -12.4 percent for Google Search and up +13.8 percent for the Display Network from last quarter.
- In Q3, the average cost per click on Google search was $0.53. On the Display Network, it was $0. 35. This represents a decline in CPC on both networks (-16.5 percent for Google Search, and -18.2 percent for the Google Display Network).
- The average conversion rate in Q3 2012 was 5.63 percent on Google Search (10.8 million conversions per day) and 4.78 percent on the Google Display Network (2.2 million conversions per day).
“In the end, huge increases in ad impression volumes and clicks more than made up for declines in cost per click and click-through rates,” said Larry Kim (pictured), founder and chief technology officer at WordStream, who compiled the data. “This research reveals that the Google economy is evolving. An individual click is not as expensive as it used to be, but many more impressions and clicks resulted in yet another record quarter for Google ad revenues. I believe this is advantageous for both Google and advertisers – it’s a win-win. Advertisers can now get more customers for lower costs, which increases the ROI of this marketing channel.”
Finance, Travel and Shopping Industries Lead Google Spending in Q3 2012
The report also revealed the top ten industry verticals that spend the most money on Google advertising. In order of spending, the top ten industries and the leading advertisers in each vertical are:
- Finance: State Farm, Geico, Quicken Loans, Capital One, and Bank of America.
- Travel: Expedia, Hotels.com, Booking.com, Priceline, and Kayak.
- Shopping: Amazon, eBay, JCPenney, Walmart, and Sears.com.
- Jobs & Education: University of Phoenix, Monster.com, ITT Tech, Devry, and Kaplan.
- Internet & Telecom: AT&T, Sprint, T-Mobile, Verizon, Comcast.
- Computers and Electronics: Best Buy, Apple, HP, Microsoft, Newegg.
- Business & Industrial: Yellow Pages, Staples, ULINE, Vistaprint, Office Depot.
- Home & Garden: Lowes, Home Depot, ServiceMagic, Kohl’s, Pottery Barn.
- Autos & Vehicles: Edmunds, AutoTrader, KBB.com (Kelley Blue Book), Ford.
- Beauty & Fitness: QVC, Walgreens, Sephora, Under Armour, Maybelline.
Industry-specific findings of WordStream’s analysis include:
- Average CPCs in the finance industry, which spends the most of any industry on Google advertising, are high – over $3 per click on the search network and over $1 per click on the Display Network. The vertical with the next highest CPC is jobs and education, at $1.80 on Google search.
- Finance-related ads on Google result in over 1 million completed conversions per day.
- The industry with the highest average click-through rate is shopping, with average CTR 5.23 percent, followed by travel at 4.88 percent.
- The jobs and education sector has the highest conversion rates, at 6.27 percent, followed by shopping at 6.09 percent and beauty and fitness at 5.63 percent.
- Together, the Search and Display networks account for nearly 13 million conversions per day, not only adding to Google’s own bottom line but also generating trillions for advertisers and the economy.
Visit the infographic for more data on the economics of Google’s advertising platform, as well as detailed information on the survey methodology.
About WordStream, Inc.
WordStream Inc. is an industry thought leader in the field of search engine marketing. Loved for our free AdWords Performance Grader which can deliver the equivalent of 40 hours of analysis in 60 seconds or less, we continue to create blockbuster tools for small and mid-sized businesses. Our 20-Minute PPC Work Week, an easy-to-use AdWords management software, has helped our customers get expert-level increases in relevance and Quality Scores for their online advertisements. Whether you’re new to search marketing or are experienced at PPC management, WordStream’s keyword tools and PPC management software can help grow your business and drive better results.
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