- The document analyzes the impact of Google removing ads from the right side of the search engine results page (SERP) and showing four top ads instead. - It describes six hypotheses about potential effects, such as cost-per-click (CPC) inflation, decreased auction participation, and changes in traffic sources. - Data from 12 million search impressions across four retail verticals before and after the change was analyzed to test the hypotheses. Most were supported by the data, except CPC was not found to increase for text ads as expected.

1. STUDY ON THE PERFORMANCE IMPACT
ON PAID SEARCH RESULTS DUE TO THE
ELIMINATION OF ADS ON THE RIGHT
HAND SIDE OF THE GOOGLE SERP
A NETELIXIR UNIVERSITY WHITEPAPER
APRIL 28, 2016

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Table of Contents
1. Executive Summary
2. Introduction
3. Methodology
4. Results / Insights for
4.1. Hypotheses on CPC inflation
4.2. Hypotheses on auction participation
4.3. Hypothesis on fourth position ad
4.4. Hypotheses on share of traffic

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Executive Summary
Background
The recent change in Google desktop SERP (Search engine results page) related to the
elimination of right-hand-side text ads and showing four top ads has spurred lots of
speculations in the PPC industry. By removing the right hand side ad units, Google
basically reduced the real estate area for search engine advertisers in order to provide a
unified SERP experience across devices. However, one point to note is that this change
has affected only the queries with a commercial intent.
The above change will have serious implications on the retail PPC advertising. Though
the NetElixir retail insights team welcomed the design change with enthusiasm, they
have anticipated certain performance signals. These include: CPC (cost-per-click)
inflation for keywords, overall reduced auction participation and others. To validate our
assumptions, we carried out a study evaluating the performance impact of the change in
layout.
We started with a typical inferential statistical approach of formulating hypotheses and
validating them with data. Data was collected on only PC users searching via Google
from Jan 1st
till April 15th
. The data, comprised of 12 million impressions, belongs to four
different verticals in the retail industry.
Summary of findings
Affected Metric Results
CPC (Cost per Click) CPC has not inflated for text-ads while it has happened for PLAs.
CTR (Click through rate) The CTR for the fourth position text ad has increased.
Auction Participation
Percentage
The number of auction participants has decreased.
Share of traffic from
PPC
The share of traffic from PPC has not decreased, rather
marginally increased.
Share of traffic from
Organic Listings
The share of traffic from organic listings has decreased.
We have shared our conclusions and points of view around the findings in the next
page.

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Conclusions & Points of View
1. The cost-per-click for keywords used to purchase text ads has not increased, in
contrary to what we hypothesized. However there is a marginal inflation in the
CPC for Product Listing ads. This proves that search advertisers will have to
marginally raise their budgets to adapt to the new layout. (It is pure economics.
Supply comes down; Demand remains the same. A price increase is bound to
happen.)
2. The number of advertisers participating in an auction has decreased. This
indicates that many advertisers could not enter the auction since there are less
number of ad slots placed for bidding. Needless to say, the above information
should not be translated into an idea of decreased competition as the level of
bidding has not really changed. However it signals the withdrawal of the
advertisers at the lowest end of the spectrum who would be mostly SMEs.
3. Since the fourth position ad is introduced in the top of the SERP, it has attracted
better visibility, hence higher click-through-rate. This ad slot also allows
extensions which is why it is imperative to include them for all top-performing
keywords.
4. The share of traffic for PPC has not been effected. We find this to be quite logical
as the additional top ad and better visibility for PLAs has offset the lost
impressions and clicks from the ads from the eliminated slots. In fact, we observe
that the share of traffic from PPC in an increased state.
5. The share of traffic from organic listings has marginally decreased. We are not
concluding on this as “organic” is a channel difficult to hypothesize. However, we
believe, a decline in the organic traffic is a plausible happening as currently there
are four text ads in the top of the SERP and organic listings have been pushed
down below the fold.

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Introduction
“In GOD we trust; all others must bring data”
– W. Edwards Deming
Around the middle of February 2016, Google made a major change in the layout of the
desktop SERP (search engine results page) by removing the PPC (pay-per-click) text ads
appearing on the right hand side of the SERP. This layout change is mainly for the search
queries with commercial intent. This was not just a cosmetic change but a strategic one
where Google wanted a unified design across devices. This update encapsulated the
following changes:
 Desktop and Tablet can show up to a max of four top ads
 Right-hand side (RHS) text ads removed (except for Product Listing Ads - PLAs) on
desktop Google Search; Bottom ads remain
 Reintroduction of two-line site-links and deprecation of non-brand 2-expanded
site-links on desktop
The changes in the layout is not an entirely new concept. The experiments around it
have been an ongoing process and the SERP has been evolving to create the optimal
user experience. (Check this Search Engine Land blog in 2010 on how Google has come
up with four top ads.)
Being search purists and believers in the power of data, the NetElixir Retail Insights Lab
initiated a data-study to understand the impact on performance of the above changes.
We did collective brainstorming to arrive upon certain hypotheses around the
performance. Later, just as in a typical inferential statistical study, we validated our
hypotheses. There are instances where our hypotheses went wrong, standing against
the logical presumptions. We have accepted such cases since those were what the data
suggested.
Note: In the next page, we have showcased one screenshot which explains the new SERP
layout.

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Old Layout:
New Layout:
NO TEXT ADS IN RHS

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Methodology
The project consisted of two phases:
 Framing of hypotheses
 Data collection & validation
Hypotheses
We formulated six different hypotheses which could be the possible implications of the
change in the layout of the Google SERP. These are scenarios that may have happened
after the middle of February around when Google rolled out the change in the layout.
There are two hypotheses on CPC inflation, one on auction participation, another one
on the CTR of fourth position ad and two on the share of traffic from PPC and Organic
listings. The hypotheses are:
H1: The CPC (Cost-per-Click) has inflated for the text ads.
H2: The CPC has inflated for the Product Listing ads.
H3: The auction participation has decreased.
H4: The CTR for the fourth position ad has increased.
H5: The share of traffic from PPC has been affected.
H6: The share of traffic from Organic listings has marginally decreased.
Data Collection & Validation
Data collection had the following characteristics.
 Data was collected only for PC users searching via Google from Jan 1st
till April
15th
.
 The data comprises of 12 million impressions.
 The data belongs to advertisers of four different verticals.
Data validation was done in a typical inferential statistical method where we analyzed
the data and checked whether the hypothesized trend is visible or not. Mostly it is a
comparison between the trend before the layout change and after that. Please note
that we have either accepted or rejected the above hypotheses while we do not claim
any other outside trend to be true or false.

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Results & Insights
Hypotheses on CPC inflation
H1: The CPC (Cost-per-Click) has inflated for text ads.
H2: The CPC has inflated for Product Listing ads.
Hypothesis Rationale: As the real estate area (supply) for the PPC ads decreases while
the advertising incentives (demand) remain the same, the cost per click is bound to
increase.
Data Graph:
Result: The graph above suggests that the CPC has marginally declined or in some cases
remained stagnant for keywords used to purchase text ads. For the product listing ads,
the CPC has gone up marginally. So, based on the above observations, H1 is rejected
while H2 is accepted.
Insights: The CPC incline, as expected, for the keywords used to purchase text ads has
not really happened. However CPC has marginally risen for Product Listing ads. From a
very high level, this data tells us that there needs to be a marginal increase in the
advertising spend to adapt to the new layout.

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Hypothesis on auction participation
H3: The auction participation has decreased.
Hypothesis Rationale: The number of ad-slots (supply) up for an auction decreases. This
leads to less number of advertisers qualifying for an auction. Naturally the overall level
of auction participation will decrease.
Data Graph:
Note: The number of auction participants in the first period is taken as a baseline.
Results: As the above graphs suggest, the number of auction participants decreased,
starting from late Feb. However B2B clients may see an exception as the number of
competitors are relatively less. Anyhow, based on the above observations, H3 is
accepted.
Insights: The reduced level of auction participation does not really indicate a lesser
competition. It is just that those advertisers who were bidding less in the earlier
auctions are not even allowed to enter the auction.

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Hypothesis on the CTR of fourth position text ad
H4: The CTR for the fourth position ad has increased.
Hypothesis Rationale: The text ad in the fourth position was previously appearing on the
right-hand-side. Now it is on the top position, sometimes with the site-links as well. This
should enhance the CTR
Data Graph:
Results: As the graph suggests, the CTR for the fourth position has improved. The
hypothesis, H4 is accepted.
Insights: Now there are four top ads which can be leveraged in terms of a higher CTR.
The top–slot ads have been the best performing by driving almost 89% of the PPC
traffic. With one more in that section, PPC traffic is benefitting. It also becomes
imperative to include all possible extensions for the best performing keywords as the
chances to be in the top is higher now.
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
1/Jan
8/Jan
15/Jan
22/Jan
29/Jan
5/Feb
12/Feb
19/Feb
26/Feb
4/Mar
11/Mar
18/Mar
25/Mar
1/Apr
8/Apr
15/Apr
4th Pos CTR

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Hypotheses on share of traffic
H5: The share of traffic from PPC has not been effected.
H6: The share of traffic from Organic listings has marginally decreased.
Hypothesis Rationale: Historically, the top ads have been driving almost close to 89% of
the traffic. With an additional top ad in place as well as PLAs either in the top or right,
we estimated that the PPC traffic is not going to be affected. Also, now the extensions
can show up in four ads versus three in the earlier case. The PPC traffic is going to
remain steady, if not increase.
With four text ads in the top, the organic listings get pushed down. This may lead to a
marginal reduction in traffic from organic listings.
Data Graph:
Results: As the graph suggests, the traffic from PLAs have increased and that from
organic listings has decreased. H5 and H6 are accepted.
Insights: This finding will have serious implications on budgeting. PLAs have always
remained the dark horse of PPC and the above results underscores that statement.
Increased focus in terms of budgeting may be required in PLAs as it would to lead to
more clicks and conversions. This is more evident in one of our retail accounts where
the share of e-commerce revenue from PLAs is about 35% after the change contrary to
28% before the change.
The traffic from organic listings has marginally come down for these selected
advertisers. We cannot conclude on this as it is a small decline and it may require
repeated tests on multiple data-sets to validate.

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About NetElixir
Global search marketing solutions firm headquartered in Princeton, NJ. Our purpose is
to help businesses profitably acquire customers online through a combination of
technology and service solutions.
www.netelixir.com