Forecast: Google Search on tablets will generate $5B in 2013

February 12, 2013 | By Jason Ankeny

Search activity on tablet devices will generate as much as $5 billion in Google (NASDAQ:GOOG) revenues this year, according to a new report issued by Marin Software, which provides services to help brands and agencies manage their online advertising efforts.

Tablets will drive 20 percent of Google's U.S. paid search ad clicks by December 2013, up from 10.7 percent a year earlier, Marin Software forecasts. The firm notes Google's conversion rates on search clicks originating from tablets surged 31 percent in 2012, compared to 9 percent on smartphones and 7 percent on desktops. At the end of last year, the conversion rate of tablet search ads was 3.3 percent versus 3.9 percent on the desktop, and Marin anticipates conversion rates from tablet ads will surpass desktop conversions by this year's end.

In addition, Marin found click-through rates for search ads on tablets are now 37 percent higher than ads placed on desktop searches. Although the average cost-per-click for paid search ads on tablets was still 17 percent lower than desktop CPC rates in 2012, tablet CPC rates increased 25 percent last year, and Marin predicts tablet CPCs will equal desktop CPCs by the end of 2013.

Marin also reports that the share of search ad spend targeting tablets grew from 4.8 percent to 10 percent over the course of 2012, with tablet spend eclipsing smartphones for the first time during the fourth quarter. "Either tablets have overperformed or smartphones have underperformed," said Matt Lawson, Marin's chief marketing officer, in an interview with The Wall Street Journal.

The Marin report is drawn from data collected from its clients, including Macy's, Gap and the University of Phoenix, which spend a combined $4 billion annually on search ads.

Google generated about $40 billion in total ad revenue in 2012. Last week, the company overhauled its AdWords platform to reach consumers across all device screens, a move advertising industry executives said will increase the company's mobile ad revenues and assuage concerns that the shift from the desktop to smartphones and tablets is damaging its bottom line.

In a blog post announcing the AdWords changes, dubbed "enhanced campaigns," Google said it will require all advertisers to pay for mobile ads even if they only wish to reach consumers via the desktop. The revamp is designed to help merchants reach customers manage integrated campaigns stretching across multiple connected devices, shaped by contextual factors like location, time of day and device type. "A recent study of multi-device consumers found that 90 percent move sequentially between several screens to accomplish a task," wrote Google Senior Vice President of Engineering Sridhar Ramaswamy. "This creates great opportunities for businesses but can also make marketing more complex and time-consuming."

Enhanced campaigns will roll out to AdWords advertisers as an option over the next few weeks, with Google planning to upgrade all campaigns by mid-year. Key features include bid adjustments for managing spending across devices, locations and time of day, context-optimized promotions and measurement tools to help marketers compare and contrast interactions on different devices and platforms.

Google's mobile search business hinges on traffic from Apple (NASDAQ:AAPL) iOS devices: Based on figures provided in its patent and copyright infringement battle with Oracle as well as remarks from Google CEO Larry Page, insiders believe iOS generates about 80 percent of Google's mobile advertising revenues. Google pays roughly $1 billion per year to remain the default search option on devices like the iPhone and iPad, according to analyst estimates.

For more:
- read this release
- read this Wall Street Journal article