Dive Brief:

• Mobile cost-per-click rates for paid search rose 40% year-over-year during Q1, reaching the highest ever level, according to a new report from iProspect that was highlighted in a report on MediaPost. 
• The analysis of Google AdWords data found that mobile’s share of clicks reached 59%. Overall, mobile impressions rose 56% and clicks were up 13%.
• During the same period, CPC rates for Google Shopping ads dropped 18% as more traffic moved to mobile, with 62% of clicks occurring on mobile compared with 49% a year ago. 

Dive Insight:

The volume of mobile searches on Google surged ahead of desktop two years ago, reflecting how consumers increasingly use their phones to find nearby businesses or compare prices. However, the cost to marketers of search ads on mobile has lagged behind desktop for a variety of reasons, including that the search experience on mobile is often inferior because of the small screens on smartphones. Google has worked hard to improve the user experience for mobile searchers through a number of steps, and iProspect’s findings suggest that these efforts may be paying off.

However, higher mobile CPC rates present some challenges for marketers, per iProspect. While marketers are investing more in mobile paid search, a more competitive environment means that, as prices continue to go up, marketers may be forced to cut down on bidding in order to remain within budget, thereby limiting the volume of traffic they can drive to their sites.

The drop in CPC rates for Shopping ads is surprising given that these visually driven units have been a big hit with retailers and have grown quickly. The drop could be a reflection of the fact that a number of stores are closing as retailers continue to try to find the right balance of online and physical presence to overall sales declines. 

Overall, the report's findings bode well for Google’s upcoming quarterly financial results, which will be released tomorrow. Low mobile CPC rates have been a thorn in the company’s side because of the potential to undercut revenue as mobile search continues to grow.