Google (GOOG) Paid Clicks, Mobile CPCs on the Rise; ECs Expected to Take Hold Soon - Cowen

Cowen and Company recently held a conference call with Ben Kirshner, CEO of EliteSEM, a search agency with 150+ clients and $100MM+ in annual search adv. spend. The following is a brief overview of Kirshner's thoughts on Google, Inc. (Nasdaq: GOOG).

Kirshner said Google's search trends are solid, with paid clicks and mobile CPCs are rising. Cowen analyst John Blackledge commented, Google is benefiting from solid search industry fundamentals, where 2014 budgets appear to be up 20 percent y/y driven by higher paid clicks, rising mobile CPCs, offset by flattish PC/tablet CPCs. GOOG has increased the real estate devoted to paid ads (via PLAs, site link extensions, etc.), which is driving higher click through rates. While PC/tablet CPCs of $0.90 may see modest upside in ‘14, mobile CPCs are closing the gap, currently at a 15-20 percent discount (vs. 20-30 percent last year) and should price at a premium longer-term.

Enhanced campaigns are expected to be a positive for Google due to their ability to add bid modifiers to current device, location and day part, to assist with targeting.

Google bought Channel Intelligence to beef up Product Listing Ad (PLA) capabilities, adding engineers that know product feeds. In the last two weeks GOOG added a tab in AdWords, starting to improve back-end functionality for advertisers. PLA’s are starting to appear above the paid search results, which signals high click through rate. Over time, GOOG PLAs will likely be highly functional and targeted for consumers, as GOOG heads toward a marketplace direction. PLA budget could rise to 15 percent of total search spend in ’14 vs. about 10 percent in ’13.

Cowen rates Google at Outperform with a price target of $1,384.

For an analyst ratings summary and ratings history on Google click here. For more ratings news on Google click here.

Shares of Google closed at $1189.06 yesterday.

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