Google: YouTube Has Been The Cause Of Declining CPCs This Whole Time

You may recall that on the most recent earnings call with analysts, Google CFO Patrick Pichette said that Google’s declining ad click costs, have not been caused by mobile, as many have assumed, but by YouTube. This week, VP of search ads, Jerry Dischler, told the audience at SMX Advanced in Seattle, that YouTube has been the cause of declining CPCs not just in the past quarter, but this whole time — CPCs started heading south in Q4 2011.

Last quarter, Google reported that clicks to Google sites (Google.com, Gmail, Maps, YouTube) increased by 25 percent year-over-year while CPCs from Google sites fell by 13 percent.

Here’s what Pichette said on the call about the numbers:

So many commentators are incorrectly assuming that the growth trends in our sites, clicks, and CPCs are primarily due to difficulties monetizing search on Mobile, but that’s in fact not the case. Remember that sites metrics includes clicks and revenues related to ads served and Google’s and on properties, most notably, obviously, Google.com, but as well as YouTube, engagement ads like TrueView, where users choose not to skip an ad is counted as a click.

While over the past year, we have seen YouTube viewership claimed dramatically both in established markets but also due to rapid expansion in emerging markets, and quality improvements in the TrueView ads mean that more users are in fact choosing not to skip them, increasing the overall ad view.

So this means that there is much higher volume of TrueView ads being seen, which has been a significant driver of year-over-year growth in numbers that you have seen in site’s clicks. TrueView ads currently monetize at lower rates than ad clicks on Google.com, but as you know, video ads generally reach people earlier in the purchase funnel and so across the industry, they tend to have a very different pricing profile than they would have on a typical performance search ad. Excluding the impact of YouTube TrueView ads, growth in site clicks would be lower, but still positive, and our CPCs would be healthy and growing year-over-year. So really, we have two positive stories to tell here today.

It wasn’t quite clear if Pichette was attributing the declining CPCs since Q4 2011 on YouTube, or just the most recent quarter. However, when asked if it was a one-time impact or long-term, Dischler said that the falling CPCs have always been about YouTube.

The YouTube explanation seemed to come out of left field since Google has never mentioned YouTube explicitly among the various factors it has listed when addressing questions about CPCs. Answers typically the sounded something like this explanation Pichette gave on the Q3 2013 call: “Monetization metrics continue to be impacted by a whole set of factors … they include geographic mix, channel mix, property mix as well as product and policy changes”.

It’s not clear why Google waited this long to name a specific cause for the declining metrics and try to put to rest concerns — and lots of commentary — that the company hasn’t been able to monetize mobile well. Google has repeated on several occasions, including in a letter to the SEC, that it believes breaking out mobile from PC performance would only cause confusion. Dischler also reiterated this concern in the SMX keynote discussion this week.