PPC is a global force in advertising, accounting for almost 70% of Google’s total revenue in 2015 and a 16% increase in revenue year-over-year for Bing. If their history is any indication, the search engine giants are continually looking for ways to increase their revenue, in part by making their search engine and advertising platforms more user-friendly for both searchers and advertisers. I’ll be exploring the impact of changes in PPC in this blog and using them to predict its future.

The beginning

Did you know the first company to use PPC wasn’t Google or Bing? Planet Oasis, an online directory that provided links to a variety of websites, started PPC in 1996 when it invented a ‘pay-per-visit’ model. In the same year, to much negative publicity, Open Text began using PPC ads in the form of ‘preferred listings’ in its search results. By the end of 1997, more than 400 major brands were paying up to $0.25 per click for top placements.

In 1998, a start-up company called Goto.com, now part of Yahoo!, presented a PPC search engine concept to a conference in California. This presentation and the events that followed created the foundation for modern PPC systems.

The early 2000s

Today it’s hard to imagine Google being ad-less, but the search engine giant only launched AdWords in 2000 with 350 advertisers – a small sliver compared to its one million advertisers generating billions in revenue for the company today. The 2000 version of AdWords allowed advertisers to publish text ads for placement in its search engine using a cost-per-thousand-impressions model, whereby advertisers paid each time their ad was shown 1,000 times.

Prior to the launch of AdWords, this was how Google appeared with no ads (photo credit: https://edge45.co.uk, 2017).

Prior to the launch of AdWords, this was how Google appeared with no ads (photo credit: https://edge45.co.uk, 2017).

In 2003, Overture was bought by Yahoo!, whose primary source of search advertising was display ads. It earned $288m in ad revenue, while Google’s ad revenue for its cost-per-thousand-impression ads in the same year was $85m.

It wasn’t until 2002 Google introduced PPC. Its 2002 version used ad relevance (measured by click-through rate) for ad ranking, maximising revenue and search experience, compared to the 2000 version which rewarded advertisers who simply invested the most in impression views. In its press release announcing AdWords, Google highlighted how its ads would appear; an interesting contrast to the make-PPC-ads-look-like-organic-search-results approach it takes today:

"Google’s quick-loading AdWords text ads appear to the right of the Google search results and are highlighted as sponsored links, clearly separate from the search results."

You can read the full press release here.

Pink and green backgrounds with bold text may seem unusual now, but they were used to highlight Google ads in the early 2000s (photo credit: https://edge45.co.uk, 2017)

Pink and green backgrounds with bold text may seem unusual now, but they were used to highlight Google ads in the early 2000s (photo credit: https://edge45.co.uk, 2017)

Google Analytics was introduced in 2005 to allow advertisers to better track their campaign performance using detailed website traffic reports. Demand for Analytics was so high after its release that new sign-ups were suspended only a week after its release, before Google added enough capacity to its servers to finally allow Analytics to be available to all users in mid-2006.

The late 2000s

In 2008 Google introduced quality score, which gave priority ad rankings to advertisers who showed relevant and valuable content to customers in conjunction with their CPC bids, rather than to advertisers who strictly offered the greatest bid. This improved the quality of ads listed on paid search sites, and ultimately improved the experience of users who click on paid search ads.

In 2010, Microsoft launched Bing and partnered with Yahoo! to launch its ads on the Yahoo! network in an effort to combat Google’s growing market share. At around the same time, Google launched additional features to its AdWords platform, including shopping ads, remarketing, and clickable phone ads.

PPC today

Google continued to expand its PPC with the introduction of dynamic remarketing (remarketing products similar to ones the user had viewed) in 2013, phone call tracking from ads in 2014, and expanded text ads in 2016. Most recently, Google said goodbye to text ads on the right-side of search results, and changed the colour of its ad symbol from yellow to green, making the difference between organic and paid search results almost inconspicuous.

A modern AdWords ad

A modern AdWords ad

Paid search will continue to unpredictably evolve with more bells and whistles to make the user experience as effortless as possible, while helping advertisers reach customers at the right moment in their journey. With the above trends in mind, where is PPC expected to go?

The future of PPC

  • Greater use of message extensions – Google’s new message extensions combine SMS messaging with search ads, allowing users to chat directly with businesses from an ad. As more users now search on mobile than on desktops, it’s expected that message extensions will transform how businesses communicate with customers. The extensions have the opportunity to streamline business operations while dramatically improving customer response times and satisfaction.
voice search
  • Voice search – Voice searches are the fastest growing type of search, according to Google Zurich engineer Behshad Behzadi, and have encouraged a more conversational interaction between device and user. They allow the user to multi-task, and offer a faster and hands-free approach to searching.  Amazon Echo has quickly become a hot-selling item, while digital personal assistants like Siri and Cortana make voice search an everyday thing for many. Voice search is currently used by 55% of teens and 41% of adults, and is becoming more reliable and popular as technology improves: the error rate for speech recognition is 8% compared to around 40% in 2012 (9to5google.com, 2017).

  • New labelling for search ads – Although Google's solid green icon on search text ads was only rolled out in mid-2016, Google will be rolling out a new replacement globally in an effort to further improve the look and feel of its search results page. The new icon has already been introduced in some areas and features a green-outlined "Ad" icon (searchengineland.com, 2017)

  • Stronger attribution trackingHow many times have you searched for something on your mobile on the train, then purchased it on your computer when you got home? Or, maybe you researched it on your computer then purchased it at work the next day. As customers access more devices, their conversion funnels become even more complex for marketers to understand. PPC advertisers will be relying less on last-click attribution strategies and instead working to understand and invest in customers’ minutes, days, weeks and even months before they convert to build a reliable customer base.

With all of the changes to PPC in such a short time, who knows how ads and search results will look in the long-term? With larger ads and more ads shifting organic search results down the page, will paid search ads one day dominate the entire first page of search results? Will there one day be no differentiation between PPC ads and organic listings? Let me know your predictions in the comments below!

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