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Google gets lift from Motorola deal in Q2, but mobile paid search still an issue

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While Google reported a strong second quarter overall, with a boost from its recently closed Motorola acquisition, the results do not do much to answer ongoing questions about how Google is monetizing mobile paid search.

Google received over $1.25 billion, or 10 percent of consolidated revenues, in the second quarter of 2012 from Motorola, helping the company beat analysts expectations. However, Motorola also posted an operating loss of $233 million, including $192 million for the mobile segment.

Were totally excited about this opportunity we have with Motorola, said Patrick Pichette, chief financial officer at Google, Mountain View, CA.

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Clearly everybody should expect some changes at Motorola, which weve already talked about, he said.

If you take out all the accounting noise related to the transaction, in face on the mobile side, they had a pretty stable and good quarter. There is a lot of accounting noise and it is going to take a few quarters for that to work itself out.

Mobile CPCs soft
Google said that approximately $843 million of Motorola’s revenue came from its mobile business. The deal to acquire Motorola for $12.5 billion closed in May.

The results also suggest that the revenue generated by mobile paid search ads continues to be a stumbling block.

Aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of its network members, increased approximately 42 percent over the second quarter of 2011 and increased approximately one percent over the first quarter of 2012.

The average cost-per-click for ads served on Google and network sites decreased approximately 16 percent over the second quarter of 2011 and increased approximately one percent over the first quarter of 2012.

The CPC decline has been attributed, in part, to the growing use by consumers of mobile to conduct searches, with mobile paid search typically bringing in less revenue than desktop paid search.

CPCs on mobile are still pretty soft, said Brian Kaminsky, chief operating officer at iProspect, Boston. The two ads per page [in mobile] presents a challenge.

There isnt really the premium established for those two positions and Google isnt seeing the CPCs that it hoped to see there, he said.

Overall, Google posted reported consolidated revenues totaling $12.21 billion for the quarter ended June 30, 2012, an increase of 35 percent compared to the second quarter of 2011.

Advertising revenues totaled $10.96 billion, a 21 percent increase year-over-year.

Part of the reason why mobile CPCs are not at the levels people would like to see is that many marketers are still evaluating the performance of their mobile advertising using metrics that are applicable to desktop campaigns and do not necessarily work in mobile.

There is not anything wrong with the channel and we are seeing successes, Mr. Kaminsky said. A lot of it has to do with measuring that progress in the wrong way.

Addressing the problem
In order for marketers to start measuring mobile in more meaningful ways, several things need to happen, per Mr. Kaminsky.

First, there needs to be continued progress on tracking and closing the loop for mobile advertising so that marketers are able to understand the entire picture. For example, when a consumer makes a call to respond to an ad rather than clicking on it.

Additionally, marketers need to start thinking harder about what mobile is supposed to be doing for their business.

iProspects clients who are investing heavily in mobile paid search are also making sure that they have well-optimized landing experiences for when someone clicks on a search result in mobile.

Maybe we arent looking to drive a transaction but may to push loyalty or drive engagement, Mr. Kaminsky said.

The difference between our clients who are investing in mobile and those who arent boils down to how well optimized their mobile landing experiences are and how mobile is ingrained in all of their touch points, he said. This means that the landing experience can be consumed on a mobile device and is relevant to the type of search query.

They are also looking beyond transactions and have a far more sophisticated approach.

Google is taking steps to address the problem by giving preference to those with a strong mobile landing experience.

They evaluate the landing page just like they do in a desktop search and this is one of the factors that determines where your ad shows up and how much you pay, Mr. Kaminsky said. This is a good first step.

Final Take
Chantal Tode is associate editor on Mobile Marketer, New York