Google recently revealed its earnings for the first quarter of 2015, and in order to explain a larger-than-expected drop for its ad prices, the search giant pegged growth on YouTube as a causal factor. Google said more people are watching ads on YouTube, which has in turn led to an overall dip in prices.
Google shared its Q1 2015 earnings report on April 23rd, and while its revenue rose 12% over the previous year, the cost-per-click (CPC) for advertisements on its own sites fell by 13%. At the same time, paid clicks on Google sites rose by 25%.
The decrease in CPC at first glance seems like a troubling drop, but as Google CFO Patrick Pichette explained during the earnings call, lower CPC numbers correlate with an increase in ad views on YouTube. As more people interact with YouTube’s pre-roll ads, the average cost for marketers is driven down. YouTube is particularly relevant to this conversation because advertisers value its ads less than Google’s search ads, which reach consumers who tend to be more keen on making purchases.
Therefore, as Pichette puts it, the drop in CPC is indicative of important growth on YouTube. If YouTube is receiving more clicks, it means more viewers are choosing to watch entire pre-roll ads rather than skipping them. “Viewership of YouTube videos and TrueView ads are growing significantly and YouTube’s contribution to our advertising revenues continues to grow at a strong rate year over year,” he said. “We’re really pleased with how the YouTube business is progressing.”
A summary of Google’s Q1 2015 earnings report can be found in a press release offered by the search giant.