It's official. Google's CPM-based Premium Sponsorships are being phased out, leaving CPC-based AdWords as Google's sole ad unit. The company stopped offering Premium Sponsorships to new customers last week and plans to wean existing customers from them through the rest of this year and the beginning of the next.
"In effect, Google's CPM product has been training wheels to get large advertisers on board," said Tim Armstrong, Google's vice president of advertising, explaining the move to disband the program. The notion of cost-per-click pricing was not something that major media buyers could plan for three years ago. Today, there's much wider acceptance, Armstrong said.
"The marketplace in terms of understanding data and how ROI advertising works advertising works online is there," Armstrong explained. "Now the same customers are applauding going to the CPC model."
Missed By Some Advertisers
Well, not everyone may applaud. Rumors in May that Google was going to axe Premium Sponsorships caused several Search Engine Watch readers to write-in, bemoaning the apparent loss.
"My company jumped into premium ads early and was able to 'lock in' inventory for some very important keyword terms for our business. We are a smaller company with large competitors, so this helped us. Even though I know about the popularity portion of positioning in AdWords, I am concerned that it will be difficult for us to compete in bidding for these terms," wrote one person.
"I do think that AdWords will give us some opportunities for more flexible control of our campaign and the opportunity to have our ads seen with every search, but it comes at a very steep increase in costs, and I doubt the AdWords will perform as well for us as the premium ads," they continued.
Armstrong said he's sympathetic to such concerns but feels that in the long-run, going to all CPC-based ads will help everyone: advertisers, users and Google.
Google: CPC Means Better For All
For advertisers, Armstrong said that Google's existing tools to monitor CPC ad performance is better than those for the CPM product. That means advertisers should be better able to see if their ads are pulling clicks and make adjustments, if not.
"We did have tools in place to try and manage that [for the CPM product” and had [relevancy” thresholds in place, but what you find with AdWords is that since the entire platform is based on clicks, you can manage it better," Armstrong said.
Ads gaining more clicks means more potential traffic for advertisers, as well as more revenue for Google. Clickthrough may also indicate that users are feeling the advertising is relevant, protecting Google's valuable real estate from being overlooked by searchers turned off by irrelevant ads.
Those already in the premium sponsorship program will be able to continue with it until their existing contracts expire, some which run through the beginning of next year. Armstrong said only a tiny number of Google's overall advertisers will be impacted.
"I think it will be a percentage point or less," he said.
Certainly there's no major outcry at WebmasterWorld.com's Google AdWords forum, when I looked this week.
The loss of premium sponsorships is good news for those in the AdWords program. For some time, Google has moved some AdWords ads up into the spots normally filled by premium ads. As the premium ad contacts expire, this "bump up" will happen more often to those in the AdWords program.
What about rumors of a "Premium AdWords" program that might guarantee the top two spots? Google has no plans to do this, Armstrong said. The near term goal is to have one program, CPC-based AdWords, that fills all the available ad positions.
While no new ad programs are planned, Google is expecting to roll out major new tools to help advertisers manage their campaigns, the company said.
"Our real focus is more around features that are optimizing ROI," Armstrong said, explaining one overall goal.
How will this happen? Is Google planning to build ROI measurement into its system, similar to what Overture has promised to rollout as a feature? Armstrong wouldn't say.
"The tools are really around campaign management and ROI management," he generalized, leaving specifics to emerge later. He did say the company was looking at "making it easier" for third party tools to work within its system.
As for campaign management, Armstrong said a huge challenge is to make life easier for the "40,000 keyword customer" through better tools.
"That person needs to be able to get in and out of the system easily. Google's spending a lot of time working on features that will help the large advertiser add the words in the smallest time."
Would this include something like Overture's Match Driver product, where a term like "shoes for running" is automatically targeted when you bid on "running shoes?" To a large degree, Google's system already allows advertisers to make such expansive matching like this, if they so choose (in contrast, Overture system does not allow for "opting out").
What does appear new at Google, Traffick's Andrew Goodman messaged me, is that misspellings now appear to have been combined with correct spellings, so that ads are targeted at both. Goodman said a colleague of his first discovered this happening last week.
Still No To Paid Inclusion
Earlier this year, I'd heard a rumor that Google had surveyed advertisers to see if they wanted a paid inclusion program from Google. In addition, Armstrong himself admitted that Google was studying the issue and that its search partners were asking for it, when speaking at US Bancorp Piper Jaffray's Search Symposium in March. Any decisions on this front?
"Google's sole focus is to make sure that users get relevant things, and I donbt think the case has been made for paid inclusion, and no plans for it have been made," Armstrong said.
So, don't expect to see a program rollout any time soon. As for that survey, Armstrong didn't think a survey had been done just about paid inclusion but rather that this question might have been asked along with other ad programs its advertisers might be interested in.
"We're always doing surveys of that type," Armstrong said. "I think our surveys of the marketplace are really around where advertiser are spending dollars to get ROI."
Meet Your Favorite Search Engine Watch Contributors
Many of SEW's leading expert contributors will be at ClickZ Live, the new online and digital marketing event kicking off in New York (March 31-April 3). Hear from the likes of: Thom Craver, Josh Braaten, Lisa Barone, Simon Heseltine, Josh McCoy, Lisa Raehsler, Greg Jarboe, Dan Cristo, Joseph Kerschbaum, John Gagnon, Eric Enge and more!