Google's (NASDAQ:GOOG) (NASDAQ:GOOGL) problems in maintaining its dominant position in search as the world goes mobile aren't new. Its ongoing declines in cost-per-click, or CPC, rates are often cited as a sign of Google's mobile woes. On an aggregate basis -- including Google sites and its network member online properties -- CPC dropped by another 7% last quarter.
However, there's a bit more to the story. The jump in aggregate paid clicks last quarter (up an impressive 13%, and a whopping 25% on Google-owned sites) more than made up for advertisers' unwillingness to shell out the same fees for mobile spots. The volume of paid clicks isn't surprising given new mobile search data shared by eMarketer, which is why Google is taking steps to maintain its dominant position in this all-important market.
A breakout year for mobile
The number of online searches conducted in the U.S. was split between desktop and mobile devices last year, but it appears that's going to change in a big way. Mobile search is expected to dominate this year, which is not surprising given the proliferation of mobile devices. Just as importantly for Google, 2015 is expected to be the year mobile tops desktop in total ad revenue.
Last year, according to research conducted by BIA/Kelsey and reported by eMarketer, U.S. mobile users conducted 66.5 billion local search queries, edging out 65.6 billion searches on desktops. In 2015, though, mobile devices are forecast to account for nearly 82 billion searches in the U.S., compared to "just" 64.6 billion on desktops. The disparity is expected to grow: By 2018, mobile searches should outnumber desktop queries in the U.S. by more than two-to-one.
In part because of consumers' shift to mobile search, marketers are relocating their dollars to mobile-friendly search spots. Per BIA/Kelsey's data, U.S. mobile search spending will edge desktop this year, $12.85 billion to $12.82 billion. Clearly there's a lot riding on Google maintaining its mobile search lead.
The fight is on
As of last year, Google reportedly owned 87.1% of the U.S. mobile search market. Google recently confirmed that smartphone searches outnumber desktop queries, but didn't share specifics. However, even if that figure has dropped some, it's safe to say Google remains the dominant search option of the country's mobile users.
But Apple (NASDAQ:AAPL) would like to change that. Apple recently made its Siri personal assistant more user-friendly by moving it out from behind the Home button on iPhones. Siri is now also more intuitive. The plan is to bypass the need for smartphone users to conduct a traditional search at all. Apple also announced that Spotlight can now search iPhone apps, giving users even less reason to search the Web using Google.
Add in the rumored expiration of the deal that makes Google the default search engine on Apple's Safari browser, and the iEverything maker could make a sizable dent in the search king's armor.
Riding the mobile bandwagon
Google hasn't been sitting idly by as the world has gone mobile. It has spent a great deal of development time and money to improve its mobile ad-tracking capabilities. This effort is ongoing and is beginning to pay off. Mobile users intrigued by a search ad don't necessarily complete the purchase online. Rather, an ad catches their eye, then they go into the store to make the purchase, leaving Google's ad partners with no indication of success.
Now, Google is able to track mobile consumers who were incentivized to make a purchase by an ad their device, and to present that data to its marketing partners. According to Google, the relatively new capability is already boosting mobile ad spending.
The recently announced "tweak" to Google's search algorithm is another example of its efforts to improve mobile search results. Google said it had given website owners time to make their sites "smartphone friendly" or risk dropping down the page of search results. That's a big deal because data suggests the top spot on a search results page attracts 20% to 30% of the clicks.
For investors, the new smartphone-specific algorithm is another indication Google intends on keeping its mobile search lead, and continue growing its mobile search ad revenue results. Sure, Apple and others are nipping at its heels, but Google's recent steps demonstrate it has every intention of staying on top.