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Summary

Google’s algorithm change, which prioritizes mobile-friendly sites in its search rankings, is good for consumers. And, more importantly for Google, it is good for its advertising business. It will help push up the yield for mobile search ads against a background of falling CPC rates and growing mobile traffic.

Mobile-unfriendly sites depress conversion rates

Google is introducing its new mobile search algorithm this week. It’s being called “Mobilegeddon” because businesses with websites not deemed by Google to be properly optimized for mobile will be penalized. Websites that, on the mobile screen, have text that is too small to read, links that are too close together, or pages that are too wide will be ranked lower than those that automatically squeeze into phone screens without compromising on legibility or navigability – according to Google’s own criteria.

Although Google revenues continue in their relentless rise, the company’s average cost-per-click (CPC) – the price paid by advertisers per ad click-through on Google’s network – has been relentless in its decline over the past few years. Although no one, other than Google, can say for certain why this is happening – Google is not saying – the most likely explanation is the ever-increasing share of Google traffic that is derived from both mobile phones and emerging markets. Since the Internet traffic in emerging markets is predominantly mobile-centric, it is safe to assume that most of Google’s developing-world traffic is mobile anyway – so they are largely one and the same thing.

Google recently revealed that about 50% of its traffic now comes from mobile devices.

Mobile search ads attract lower CPC rates than desktop search ads due to lower conversion rates. The factors to blame include: accidental click-throughs, as fat fingers unintentionally hit ad links on crammed mobile screens; difficult-to-navigate landing sites that haven’t been properly optimized for mobile; and timeouts when loading landing pages, partly due again to sites that are poorly designed for mobile. All these problems can be alleviated by getting advertisers to build sites that are more mobile-friendly.

Google has in the past launched initiatives such as GoMo and GetMo to help advertisers mobilize their websites. But in the face of some Web publishers’ slowness in adapting to mobile, Google has decided to get tough and demote transgressors within its search rankings.

It is bad news for businesses that fall foul of Google’s new rules, but it is good news for mobile search users and should also be good news for Google’s bottom line.

Appendix

Further reading

Poor conversion rates make mobile search desktop's poor relation, TE0003-000672 (July 2012)

Author

Guillermo Escofet, Principal Analyst, Digital Media

guillermo.escofet@ovum.com

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