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Google reduces search inventory; should advertisers worry?

Google reduces search inventory; should advertisers worry?

Author | Abhinn Shreshtha | Tuesday, Feb 23,2016 8:55 AM

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Google reduces search inventory; should advertisers worry?

Google's revamped search results page will feature no ad spots on the right hand sidebar, which could lead to increased rates for the available inventory on the results page. The new design seems to be part of the search giant's plan to make its desktop version more in sync with the mobile version, which has only in-stream ads.

The company says that it will limit the number of ad spots to 3 before the actual organic search results and a further 3 below the search results. Also, it said that there would be a further spot just before the search results for high transactional value ads. Earlier, Google would display a maximum of 8 ad spots just on the right hand sidebar. The global roll out is expected to be completed this week.

One obvious fallout of the reduction in inventory will be an increase in ad rates as advertisers try to outbid each other to get the cream of the ad spots (the ones higher up the fold). But will this have a major impact on the advertisers with lower budgets?

The thing to remember here is that this revamp is only a part of the desktop version of Google Search, and, as Vivek Bhargava, CEO of iProspect India, notes, clickthroughs from these account for just 20-30 per cent of the overall hits. The vast majority of clickthroughs nowadays have moved to mobile devices and the move by Google seems to be in tune with this trend by pushing more advertisers to invest on the mobile.

Another thing to consider is that the right hand side ads have historically seen to be less effective as compared to in-stream ads. Says Pratik Gupta, Co-founder at FoxyMoron, "In-stream ads are much more effective and they see more clickthroughs (than ads on the sidebar). Even if ad rates go up, most advertisers will still want to go with the inventory that is more effective."

Manish Kumar, Founder of Digi Osmosis feels it is part of Google’s strategy to make advertisers like e-commerce companies to focus more on product listings, which it is assumed will carried on the right hand side. “From a mobile standpoint, the right side is not important as it was never visible on mobile. However, I believe they are not entirely giving up the right hand space, but will use it for sponsored listings which will help e-commerce players in increasing conversions and leads,” he said

Bhargava agrees that ad rates will go up and this could have some impact on advertisers with lesser spending power. "Google will obviously have spent a lot of time studying the impact before making this decision. From Google's perspective I think it will not change much as 70-80 per cent of their search revenue anyway comes from in-stream ads, while for the user it will mean a less cluttered experience. For advertisers, we could see increase in ad rates," he said.

Echoing his view, Sanjay Mehta, Co-CEO of Mirum India, opined that inventory rates could shoot up in competitive categories (like e-commerce). Speaking about the possible challenges for organizations with lesser spending power, he said, "I don't know whether Google has plans to introduce newer options for SMEs or those with lower budgets. At least till now they had more options, even if they were not as effective."

Charulata Ravikumar, CEO of Razorfish India, was of the opinion that in all likelihood, Google might not keep the right sidebar completely vacant and could utilize it for product listings. According to her, the decision could be due to two reasons; the fact that more and more ads are going native and the fact that advertisers are realizing that app advertising is not working as well as hoped.

"As ads go native, the right side becomes a blind spot. I think the nature of ads will also change and Google must also work with brands to make ads more inclusive and native with communications which are build into the content," she added. She also agreed that Google might charge a premium for its reduced inventory but insisted that an advertiser's focus should be on in-content advertising.

The development is not very surprising as some SEM blogs have indicated that Google has been testing the new layout since 2010. Even in the Q3'15 earnings call, CEO Sundar Pichai had stated that mobile search growth was "more compelling in the long run" than desktop search. Though he did not get into specifics, there was a mention of expanding the portion of search results allocated to ads on mobile, among other initiatives like testing new ad formats on mobile. All this is definitive proof that Google, like many other internet companies, sees the future on the mobile rather than the desktop.

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