Google sees mobile ad rates passing PC rates
(Reuters) - Google Inc said that it expects the rates that companies pay for search ads on mobile phones could surpass the rates of its existing PC-based ad business thanks to the growing popularity of powerful smartphones.
Context & Ripple Effects
Mobile search has been a side bet inside Google since the 2007 launch of AdSense for Mobile, which was framed then as unlocking an unproven market rather than a core revenue line. What changes on 2010-03-15 is Google's own framing: management now says mobile ad rates could surpass the PC-based rates that still anchor its business, crediting powerful smartphones for making mobile queries valuable enough to command premium pricing.
The claim matters because it reframes smartphones from a defensive necessity into a potential margin story for search advertising — and it lands amid a stretch of scrutiny of the company, from the Chrome client-ID privacy questions raised earlier in March 2010 to Kaiser Kuo's SXSW presentation on the Google-in-China standoff.
First-order effects
- Advertisers bidding on Google's mobile search inventory face the prospect that those clicks become the pricier channel, forcing budget shifts out of PC-only campaigns earlier than most had planned.
- For Google, the forecast signals that Android-powered handset growth converts directly into higher-value ad inventory rather than a low-rate volume play.
Second-order effects
- Rival search and ad-network operators are pushed to prove comparable mobile click value or concede the high end of mobile bidding to Google, whose query data gives it an early read on intent on phones.
- Handset makers and carriers aligned with Android gain a stronger pitch to developers and partners: the platform's growth compounds Google's willingness to invest in mobile monetization.
Third-order effects
- If mobile rates do overtake PC rates, the industry's unit of analysis migrates from page-based impressions to revenue per active device, pressuring every ad business built on desktop assumptions.
- A sustained premium for mobile clicks would also draw regulators' and advertisers' attention to how much of the mobile funnel Google controls through search, Android, and ad serving at once — the concentration question the company already faces in China and privacy disputes.
The trend: Search advertising is repricing itself around smartphones, with Google betting that per-click value on mobile will eclipse the desktop rates that built the business.