Last year was a watershed moment for mobile advertising. With Pew Research Center reporting that roughly three-quarters of Americans use a smartphone, tablet or other mobile device to tap into the Internet at least occasionally, and 21% of consumers saying they are “almost constantly” online, marketers and advertising platforms made major adjustments to where and how consumers see ads, according to a new report by performance marketing agency Merkle.
Google Inc. has been particularly aggressive about capitalizing on the changing ways consumers go online by adding more ad inventory on mobile devices. For instance, the search engine in the third quarter added a text ad slot at the top of its mobile search results and enlarged the size of its Product Listing Ads, which include images. And, via Google’s AdSense Network, the search engine in August began presenting PLAs to shoppers on a number of large merchants’ sites, and then added PLAs to Google Image search results on smartphones in December. The net result of those changes was Merkle’s clients boosted their smartphone paid search spending 164% in the fourth quarter, which resulted in smartphone paid search clicks jumping 131%, according to the report, “Digital Marketing Report Q4 2015.”
“Google has the power to change the game almost at will,” says Mark Ballard, Merkle’s senior director of research. “What Google has done in the last few quarters has reaccelerated its mobile growth.”
In part, that’s thanks to Google’s massive market share among consumers on smartphones. Google and Google-affiliated sites accounted for 94% of U.S. smartphone paid search clicks last year. For the sake of comparison, Google’s share of U.S. desktop paid search clicks is 78%, according to Merkle.
Smartphones are where the majority of the mobile action takes place. Mobile accounted for 52% of Google clicks—with smartphones making up 36% and tablets nearly 16%. Looking across the board at Google, Yahoo and Bing, phones and tablets produced 48% of paid search clicks and 35% of spending. The 13-percentage-point spread between clicks and spending shows consumers still are more likely to buy on desktops than mobile devices, Ballard says, which keeps down the cost of mobile paid search ads. That disparity is evident even among the top retailers within mobile commerce. The median conversion rate among retailers in the Internet Retailer 2016 Mobile 500, for example, was 1.47% compared to a 2.48% conversion rate among retailers ranked in the Internet Retailer 2015 Top 500 Guide, according to Internet Retailer’s Top500Guide.com.
Those low conversion rates aren’t hurting Google’s PLA business. Smartphone PLA spending soared 208% in the fourth quarter, tablet PLA spending rose 36% and desktop PLA spending increased 8%. Across all devices, PLAs accounted for 38% of retailers’ Google search ad clicks in the fourth quarter, up from 30% a year earlier.
The report also found that organic search visits fell 4% year over year—desktop organic search traffic fell 3%, tablet search traffic dipped 13% and smartphone search traffic grew just 4%, a sharp decline from the 63% growth rate in the first quarter. The declining growth rate is likely the result of Google’s aggressive paid search moves, Ballard says.
“Any time that Google increases the inventory devoted to ads, the organic side is going to take a hit,” he says. “Everyone wants to get traffic for free, but ultimately everyone has to pay to keep the traffic coming. There really isn’t much of a choice.”
Favorite