Report Suggests Google Search Will Generate $5 Billion From Tablets

Google could generate as much as $5 billion in revenue from selling advertisements on its search engine on tablet devices in 2013, according to a new report by Marin Software, one of the top firms that helps advertisers to buy Web-search ads.

Last week, Google changed its ad system requiring advertisers to pay for ads on tablets even if they just want to reach personal-computer users. The company said it made the decision because lines were blurring between PCs and tablets, and ad performance on these devices was “similar.”

The report backed Google’s notion, saying that the effectiveness of search ads on tablets – meaning the rate at which an ad click led to a sale or accomplished some other advertiser objective – climbed 31% during 2012, and that “conversion rates” on tablets will eclipse those of desktop PCs by the end of this year. At the end of last year, the conversion rate of tablet search ads was 3.3% versus 3.9% for desktop search ads, Marin said.

The trend will cause search-ad prices on tablets to equal those of desktop search ads by the end of this year, though currently they are 17% lower. Already, advertisers are spending more of their ad budgets on tablets than on smartphones, Marin said.

“Either tablets have overperformed or smartphones have underperformed,” said Matt Lawson, Marin’s chief marketing officer, in an interview. The lag in smartphone conversion rates is partly due to the difficulty in tracking how smartphone ad clicks lead, eventually, to purchases inside stores. Google and numerous other technology companies are trying to solve that problem.

Read More: WSJ