This is what we know so far.
Near the end of November, some advertisers running Local ads have started to notice a peculiar tab in some of their accounts called "Local Competitive Keywords". It seems to be rolled out globally across select accounts running Local Ads.
Google elaborates on the new feature in an article.
What stands out in particular, is that Local Competitive Keywords contain competitor data, even including conversion data in the form of store visits. The data is particularly relevant to review, as it only includes data for which your account did not show an ad for.
The reason why Google has chosen to launch such a feature remains uncertain, especially since Google recently chose to hide a significant portion of Search Queries from visibility:
- Maximizing gains from auctions
- Ease of access for SME's
- Improving the effectiveness of AI
Ease of access for SME's
SME's (Small and Medium size Enterprises) are seen as a key potential market for Google as they make up the larger part of the economy.
There is a steep contrast between the usage of Google Ads between large and small companies. Due to the availibility of financial resources, large businesses typically understand the value that Google Ads can bring to their business and have several ways to gain leverage from the channel, for example by employing specialist agencies to manage their accounts or by developing their product in a way that it leverages the client Lifetime Value.
Small businesses on the other side are often not aware of the opportunities that Google Ads can offer them and may have lacked the time to investigate. There is still quite a high entrance barrier to using Google Ads as an advertising channel as proper implementation requires specific knowledge on keyword research, conversion tracking and understanding the dynamics of ad ranks and impression shares. (This is also a reason why we at eLama are developing our PPC tools, to make it possible for advertisers with limited budgets to stay competitive). Often a small company would try out Google Ads but fail because of ineffective setups. Later on, this advertiser will be sceptical of using Google Ads in the future as they would have already labeled the channel as "ineffective for their business".
With the new "Local Competitive Keywords", smaller advertisers can now more easily get started with running competitive campaigns, as it is now possible to quickly identify keywords that have proven to work for other advertisers. The downside of this is that the competitors which are already advertising on those keywords, will see an increase in competition which will be reflected in the higher CPC prices.
Which brings to the next argument.
Maximizing gains from auctions
A big part of the success of Google Ads comes from the Auction-Time bidding process. It ensures that the price that advertisers are paying is always "fair", because nobody was ready to bid more. In this way, the pricing gets set using principles of supply and demand.
Every impression is essentially a mini-auction, like a sale on eBay where each advertiser places their bid and the highest wins. This ensures the seller that they can get the highest price that the market had to offer. Or not?
Picture this. You are putting an antique vase from the 18th century to sell on Ebay, only to wait for 2 weeks to get the minimum offer of 5 Euro for it..
Oke maybe it was because the vase was terrible and you should be lucky that someone paid anything at all for it.
However, another option is that there hasn't been any historian who has recognized the value of the vase and has also seen the advertisement. There could have been loads of people who would have bought it for the higher price but just didn't know it was for sale. The same thing works with keywords.
Imagine if there would be 2 advertisers and 2 keywords. If they are both competing for the same keywords, the auction model would determine which one would get which for the highest bid they offer. However, if they both targeted only one of the keywords, then Google could only charge the minimum fee to both parties (in Google Ads, this is called the "ad rank threshold").
So what Google is essentially doing with the new Local Competitive Keywords, is pushing more advertisers to join the same auctions that other advertisers are in. This is good for Google and good for the advertiser who truly wanted it, but not so good for the guy who got an antique vase for 5 Euro.
Improving the effectiveness of AI
In recent years, Google has invested massively into Artificial Intelligence. The result of which is that nowadays most of the bidding is being done by Smart Bidding algorithms and advertisers increasingly make use of fully automated Smart Campaigns. Google's AI is centered around Machine learning, which is inherently reliant on the availability of data.
Instead of following pre-determined formulas, M/L (Machine Learning), relies on large quantities of data, from which it will form entities, clusters and relationships. M/L will "learn" from recognizing patterns in the data and will use them to train itself. In order for this process to be efficient, data needs to be abundant and diverse.
Besides making double efforts, manual optimization may restrict the availability of data. Advertisers naturally want to prevent spending money which does not yield results, which is why keywords are often quickly paused and certain devices get restricted with bid modifiers.
It seems plausible that Google has an interest to widen the range of accessible data by pushing advertisers to try out new keywords and broaden the matching process of currently selected keywords. The increased flow of data benefits Machine Learning algorithms to better reach their goals.
While initially it seems questionable why Google would show competitor data, especially keeping in mind the increased focus on privacy protection, there are definitely strong arguments why Google decided to do so. It allows them to better service a customer segment with high growth potential (SME's), they maximize the value gained from the auction bidding process while it trains their algorithms by increasing the availability of data.
Keep in mind, that when using the competitive query insights, you will enter into higher competition queries which likely have a higher CPC price. At eLama we are building our own competitive insights tool which doesn't only show competitors queries, but allows to view detailed metrics and even ad texts used per query.
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