As Google reported their Q1 2015 revenue earlier today, one acronym once again dominated the conversation — CPC.
The company, which makes a good deal of its revenue on ad clicks, reported another 7% drop in cost per click year-over-year (a 5% reduction from the retail-heavy Q4). The decrease in overall CPC contributed to Google missing revenue estimates ($17.26 billion vs. $17.5 billion expected) for the sixth time in nine quarters.
Outgoing Google CFO Patrick Pichette had an interesting rationale for the CPC decline during the earnings call, however, that made me take note:
It wasn’t lower mobile CPCs that led to the drop — but, instead, YouTube’s TrueView format.
For those unfamiliar with the video ad units, TrueView only charges advertisers when their ad is viewed in it’s entirety or clicked upon. Viewers have the option to skip these ads after three seconds — and when they do, advertisers don’t pay a dime.
Clearly, this product is beneficial for advertisers with smaller budgets, or those still unsure if online video advertising is worth it for them , as they are guaranteed that viewers either see their ads (theoretically….but that’s a story for another time), or, they don’t have to pay.
For Google, YouTube’s Trueview is a risk; but one that has the potential to pay off big time in the future, as more SMBs with mid-range media budgets realize that digital video is a viable (and valuable) marketing tactic.
As for CPC being down in Q1, the idea that TrueView is mostly to blame, and not mobile advertising, is a positive/negative assertion for Google to make. Given how focused the company is on mobile (see “Mobilegeddon” or Project Fi), it’s certainly a good thing that mobile advertising isn’t costing the company money. However, digital video typically garners premium rates for publishers (and content creators) — so telling the industry that YouTube is the reason for depleting CPCs will certainly raise eyebrows.