In the last quarter Google’s CPC rates decreased by 12% compared to the year before, at the same time that Facebook’s rates increased by 28%. The shift of power towards Facebook is probably the result of Google’s frantic search for new display ad revenue: the drop in CPC prices coincides with their purchase of AdMeld.

AdMeld is a real-time bidding platform that allows major publishers to sell remnant inventory – we’re talking about sites like Pandora, The Weather Channel and Answers. com, for example – so it is inevitable that this kind of traffic is hugely less valuable than Google’s own purchase-intent oriented CPC traffic. It’s not then a disaster for Google that their average CPC is dropping, so long as it is genuinely a sign of the maturing nature of their business. Google needs to be in display and must diversify away from being solely dependent on search, but it may be a painful process.

Facebook is in a different situation with reports that in Q1-2012 average CPC rates on Facebook rose from around $0.70 to about $0.90, an increase of 28%. Additionally, the buzz that surrounds every move that Facebook makes has led to an apparent shortage of inventory. If that’s the case, then presumably rates will continue their upward surge.

The good news is that Facebook too is seeking to expand their ad offerings. The massive and obvious opportunity for them is mobile – look for announcements in that area later this year