elimination of right hand side ads in serp - study - april 2016

STUDY ON THE PERFORMANCE IMPACT ON PAID SEARCH RESULTS DUE TO THE

ELIMINATION OF ADS ON THE RIGHT HAND SIDE OF THE GOOGLE SERP

A NETELIXIR UNIVERSITY WHITEPAPER

APRIL 28, 2016

NetElixir Retail Insights – Whitepaper

1

Table of Contents 1. Executive Summary

2. Introduction

3. Methodology

4. Results / Insights for

4.1. Hypotheses on CPC inflation

4.2. Hypotheses on auction participation

4.3. Hypothesis on fourth position ad

4.4. Hypotheses on share of traffic


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Executive Summary

Background

The recent change in Google desktop SERP (Search engine results page) related to the

elimination of right-hand-side text ads and showing four top ads has spurred lots of

speculations in the PPC industry. By removing the right hand side ad units, Google

basically reduced the real estate area for search engine advertisers in order to provide a

unified SERP experience across devices. However, one point to note is that this change

has affected only the queries with a commercial intent.

The above change will have serious implications on the retail PPC advertising. Though

the NetElixir retail insights team welcomed the design change with enthusiasm, they

have anticipated certain performance signals. These include: CPC (cost-per-click)

inflation for keywords, overall reduced auction participation and others. To validate our

assumptions, we carried out a study evaluating the performance impact of the change in

layout.

We started with a typical inferential statistical approach of formulating hypotheses and

validating them with data. Data was collected on only PC users searching via Google

from Jan 1st till April 15th. The data, comprised of 12 million impressions, belongs to four

different verticals in the retail industry.

Summary of findings

Affected Metric Results

CPC (Cost per Click) CPC has not inflated for text-ads while it has happened for PLAs. CTR (Click through rate) The CTR for the fourth position text ad has increased. Auction Participation Percentage

The number of auction participants has decreased.

Share of traffic from PPC

The share of traffic from PPC has not decreased, rather marginally increased.

Share of traffic from Organic Listings

The share of traffic from organic listings has decreased.

We have shared our conclusions and points of view around the findings in the next

page.


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Conclusions & Points of View

1. The cost-per-click for keywords used to purchase text ads has not increased, in

contrary to what we hypothesized. However there is a marginal inflation in the

CPC for Product Listing ads. This proves that search advertisers will have to

marginally raise their budgets to adapt to the new layout. (It is pure economics.

Supply comes down; Demand remains the same. A price increase is bound to

happen.)

2. The number of advertisers participating in an auction has decreased. This

indicates that many advertisers could not enter the auction since there are less

number of ad slots placed for bidding. Needless to say, the above information

should not be translated into an idea of decreased competition as the level of

bidding has not really changed. However it signals the withdrawal of the

advertisers at the lowest end of the spectrum who would be mostly SMEs.

3. Since the fourth position ad is introduced in the top of the SERP, it has attracted

better visibility, hence higher click-through-rate. This ad slot also allows

extensions which is why it is imperative to include them for all top-performing

keywords.

4. The share of traffic for PPC has not been effected. We find this to be quite logical

as the additional top ad and better visibility for PLAs has offset the lost

impressions and clicks from the ads from the eliminated slots. In fact, we observe

that the share of traffic from PPC in an increased state.

5. The share of traffic from organic listings has marginally decreased. We are not

concluding on this as “organic” is a channel difficult to hypothesize. However, we

believe, a decline in the organic traffic is a plausible happening as currently there

are four text ads in the top of the SERP and organic listings have been pushed

down below the fold.


4

Introduction

“In GOD we trust; all others must bring data”

– W. Edwards Deming

Around the middle of February 2016, Google made a major change in the layout of the

desktop SERP (search engine results page) by removing the PPC (pay-per-click) text ads

appearing on the right hand side of the SERP. This layout change is mainly for the search

queries with commercial intent. This was not just a cosmetic change but a strategic one

where Google wanted a unified design across devices. This update encapsulated the

following changes:

Desktop and Tablet can show up to a max of four top ads

Right-hand side (RHS) text ads removed (except for Product Listing Ads - PLAs) on

desktop Google Search; Bottom ads remain

Reintroduction of two-line site-links and deprecation of non-brand 2-expanded

site-links on desktop

The changes in the layout is not an entirely new concept. The experiments around it

have been an ongoing process and the SERP has been evolving to create the optimal

user experience. (Check this Search Engine Land blog in 2010 on how Google has come

up with four top ads.)

Being search purists and believers in the power of data, the NetElixir Retail Insights Lab

initiated a data-study to understand the impact on performance of the above changes.

We did collective brainstorming to arrive upon certain hypotheses around the

performance. Later, just as in a typical inferential statistical study, we validated our

hypotheses. There are instances where our hypotheses went wrong, standing against

the logical presumptions. We have accepted such cases since those were what the data

suggested.

Note: In the next page, we have showcased one screenshot which explains the new SERP

layout.

http://searchengineland.com/google-showing-four-top-adwords-ads-top-one-google-mortgage-ad-49784


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Old Layout:

New Layout:

NO TEXT ADS IN RHS


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Methodology

The project consisted of two phases:

Framing of hypotheses

Data collection & validation

Hypotheses

We formulated six different hypotheses which could be the possible implications of the

change in the layout of the Google SERP. These are scenarios that may have happened

after the middle of February around when Google rolled out the change in the layout.

There are two hypotheses on CPC inflation, one on auction participation, another one

on the CTR of fourth position ad and two on the share of traffic from PPC and Organic

listings. The hypotheses are:

H1: The CPC (Cost-per-Click) has inflated for the text ads.

H2: The CPC has inflated for the Product Listing ads.

H3: The auction participation has decreased.

H4: The CTR for the fourth position ad has increased.

H5: The share of traffic from PPC has been affected.

H6: The share of traffic from Organic listings has marginally decreased.

Data Collection & Validation

Data collection had the following characteristics.

Data was collected only for PC users searching via Google from Jan 1st till April

15th.

The data comprises of 12 million impressions.

The data belongs to advertisers of four different verticals.

Data validation was done in a typical inferential statistical method where we analyzed

the data and checked whether the hypothesized trend is visible or not. Mostly it is a

comparison between the trend before the layout change and after that. Please note

that we have either accepted or rejected the above hypotheses while we do not claim

any other outside trend to be true or false.


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Results & Insights

Hypotheses on CPC inflation

H1: The CPC (Cost-per-Click) has inflated for text ads.

H2: The CPC has inflated for Product Listing ads.

Hypothesis Rationale: As the real estate area (supply) for the PPC ads decreases while

the advertising incentives (demand) remain the same, the cost per click is bound to

increase.

Data Graph:

Result: The graph above suggests that the CPC has marginally declined or in some cases

remained stagnant for keywords used to purchase text ads. For the product listing ads,

the CPC has gone up marginally. So, based on the above observations, H1 is rejected

while H2 is accepted.

Insights: The CPC incline, as expected, for the keywords used to purchase text ads has

not really happened. However CPC has marginally risen for Product Listing ads. From a

very high level, this data tells us that there needs to be a marginal increase in the

advertising spend to adapt to the new layout.


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Hypothesis on auction participation

H3: The auction participation has decreased.

Hypothesis Rationale: The number of ad-slots (supply) up for an auction decreases. This

leads to less number of advertisers qualifying for an auction. Naturally the overall level

of auction participation will decrease.

Data Graph:

Note: The number of auction participants in the first period is taken as a baseline.

Results: As the above graphs suggest, the number of auction participants decreased,

starting from late Feb. However B2B clients may see an exception as the number of

competitors are relatively less. Anyhow, based on the above observations, H3 is

accepted.

Insights: The reduced level of auction participation does not really indicate a lesser

competition. It is just that those advertisers who were bidding less in the earlier

auctions are not even allowed to enter the auction.


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Hypothesis on the CTR of fourth position text ad

H4: The CTR for the fourth position ad has increased.

Hypothesis Rationale: The text ad in the fourth position was previously appearing on the

right-hand-side. Now it is on the top position, sometimes with the site-links as well. This

should enhance the CTR

Data Graph:

Results: As the graph suggests, the CTR for the fourth position has improved. The

hypothesis, H4 is accepted.

Insights: Now there are four top ads which can be leveraged in terms of a higher CTR.

The top–slot ads have been the best performing by driving almost 89% of the PPC

traffic. With one more in that section, PPC traffic is benefitting. It also becomes

imperative to include all possible extensions for the best performing keywords as the

chances to be in the top is higher now.

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Hypotheses on share of traffic

H5: The share of traffic from PPC has not been effected.

H6: The share of traffic from Organic listings has marginally decreased.

Hypothesis Rationale: Historically, the top ads have been driving almost close to 89% of

the traffic. With an additional top ad in place as well as PLAs either in the top or right,

we estimated that the PPC traffic is not going to be affected. Also, now the extensions

can show up in four ads versus three in the earlier case. The PPC traffic is going to

remain steady, if not increase.

With four text ads in the top, the organic listings get pushed down. This may lead to a

marginal reduction in traffic from organic listings.

Data Graph:

Results: As the graph suggests, the traffic from PLAs have increased and that from

organic listings has decreased. H5 and H6 are accepted.

Insights: This finding will have serious implications on budgeting. PLAs have always

remained the dark horse of PPC and the above results underscores that statement.

Increased focus in terms of budgeting may be required in PLAs as it would to lead to

more clicks and conversions. This is more evident in one of our retail accounts where

the share of e-commerce revenue from PLAs is about 35% after the change contrary to

28% before the change.

The traffic from organic listings has marginally come down for these selected

advertisers. We cannot conclude on this as it is a small decline and it may require

repeated tests on multiple data-sets to validate.


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About NetElixir

Global search marketing solutions firm headquartered in Princeton, NJ. Our purpose is

to help businesses profitably acquire customers online through a combination of

technology and service solutions.

www.netelixir.com

http://www.netelixir.com/

elimination of right hand side ads in serp - study - april 2016

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