Home Technology Google Inc (GOOG) Ahead Of Facebook Inc (FB) In Ads: SIG

Google Inc (GOOG) Ahead Of Facebook Inc (FB) In Ads: SIG

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Susquehanna Financial Group analyst Brian Nowak hosted a conference call with Rimm-Kaufman Group (RKG) to discuss the latest trends in internet advertising and made  a transcript of the call available in his report titled ‘Internet Industry Update’ dated October 14, 2013.

Google Inc (GOOG) Ahead Of Facebook Inc (FB) In Ads: SIG

Here are some insights into internet advertising trends that are particularly relevant to the revenues and profitability for companies such as Facebook Inc (NASDAQ:FB) and Google.

Advertising dollar growth likely remained strong at Google

Drawing an inference from RKG’s client ad spend trends for Google Inc (NASDAQ:GOOG) during Q3, which grew 18% on an annualized basis, the author thinks Google Inc (NASDAQ:GOOG) should see solid Q3 ad performance.

Google’s enhanced campaigns

What are enhanced campaigns? According to Google, “Enhanced campaigns let you easily manage complex targeting, bidding, and ads for different platforms like mobile and computers all within the same campaign. Account management has also been consolidated for tablets and desktops. Additionally, with enhanced campaigns you can reduce the overall number of campaigns you need to create—you no longer need to create a separate campaign for each target device type or location.”

The much-vaunted enhanced campaigns went live in July 2013. According to RKG clients these campaigns are likely, in the short term, to cause CPC weakness. This is because clients have started to closely monitor their ad bidding for smartphones and the ROI thereon. This could result in lower ad bids for smartphones compared to desktops. Another fallout of enhanced campaigns—clients have smartened up and are bidding more on long-tail keywords that have lower CPC’s and provide better ROI to the client. Both these factors have somewhat negative connotations for Google’s CPC.

Facebook ad pricing competitive

RKG reports strong client interest in Facebook Inc (NASDAQ:FB)’s FBX ad offering for its low pricing and attractive ROI. However, Google is yet to face the heat of competition from FBX, as the latter is mostly drawing market share from other players.

Product Listing ads (PLAs)

According to RKG, Product Listing ads, which are seeing increased adoption from clients, could be lucrative for Google Inc (NASDAQ:GOOG) in the forthcoming holiday shopping season, as well as allow it to improve growth in retail category advertising.

Conclusion

Google Inc (NASDAQ:GOOG) will report Q3 earnings on Thursday. Susquehanna is bullish because “ad dollar growth remains solid and … Google Inc (NASDAQ:GOOG) is not losing ad dollar share to FB. Enhanced Campaigns is causing some CPC bumpiness, but ad dollar growth is more important than CPC optics.”

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