Google has been quietly placing more ads in search results

Advertising success.
Advertising success.
Image: AP Photo/Ben Margot
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Google’s empire is built on advertising—and over the past year the company has been discreetly adding more of it in more places.

In the fourth quarter of 2016, Mountain View, California-based Google (now the search engine arm of parent company Alphabet) posted advertising revenue of $22.4 billion, up 17% over the same quarter in 2015 and accounting for 87% of all Google revenue in the quarter. In 2015, Google accounted for fully half of the record $60 billion in revenue generated by the entire digital advertising industry, analyst Brian Wieser told Bloomberg.

While Google’s command of search is exceedingly strong—the company told Search Engine Land it handled more than 2 trillion searches last year, up from 1.2 trillion in 2012—not all of its ad revenue is coming from the same old slots. Google has also been adding sponsored results in entirely new places.

Perhaps most significantly, Google is executing a shift from desktop to mobile, as users move away from personal computers and toward handheld devices. Early last year, the company began removing ads in the right rail on its desktop search-results page, while increasing the number of ad slots on mobile. Ginny Marvin, an online marketing expert and contributing editor at Search Engine Land, says the pivot is to be expected as “more ad clicks are coming on mobile.” (That said, the disparity between desktop and mobile ad prices means Google’s “cost-per-click,” or the amount the company makes from advertisers each time someone clicks on an ad, is still falling.)

Ads are popping up elsewhere too: In 2016, routine searches sometimes turned up as many as four of five sponsored results, compared with one or two a few years ago. (The number of ads vary each time a query is entered.) Google also slipped sponsored results into image searches, and added a second ad slot in its Google Play Store. The company bumped up advertising on YouTube, and developed video-advertising opportunities like its partnership with Turner Sports to deliver behind-­the-­scenes NBA pre­game footage in real time. Google even boasted that YouTube ads are superior to TV spots.

At the end of 2016, the company also introduced its ‘Promoted Places’ feature, which allows retailers to brand their pin results in Google Maps, share ongoing promotions, and help shoppers avoid crowds by pinging them when a store is at its busiest. The addition was a crucial one: A third of Google’s mobile searches are for nearby locations.

Google does not break out advertising revenue by type (sponsored search results versus Promoted Places, for example).

“This was the year that mobile shopping went truly mainstream, with shoppers using phones as they go to the store to locate nearby retailers, find promotions and comparison-shop,” Google CEO Sundar Pichai said during the company’s fourth-quarter earnings call. As evidence of the opportunity for retailers, Pichai cited a fourfold increase in mobile traffic to Gap’s e-commerce site between December 2015 and December 2016 after the clothing store increased its US mobile search ad spend.

That Google would be both increasing and diversifying its ad offerings may be annoying for users, but it comes as no surprise: People are changing what they search for, and how they search for it. Google also faces upstart competition in both Facebook and Amazon. The former commanded $8 billion of the digital ad market last year, and the latter’s ad business is growing like a beast.