Amazon.com Inc.’s ad business gained steam in the fourth quarter, with investment in the retailer’s two most popular formats, Sponsored Product and Headline Search ads, increasing 64% and 75% compared to the third quarter, according to digital marketing firm Merkle RKG’s “Merkle Digital Marketing Report Q4 2017.”
Sponsored Product ads accounted for 85% of all Amazon search and product detail paid ad spending in the fourth quarter, up from 80% in the third quarter (Merkle offered quarter-over-quarter comparisons for Amazon ads because its client set that advertises on the platform has grown dramatically over the past year). Sponsored Product ads are keyword-targeted, cost-per-click ads that can either appear on the right-hand side or bottom of search results and product detail pages on desktop and mobile devices.
Headline Search ads, which are keyword-targeted, cost-per-click search ads that appear at the top of the first page of search results on desktop and mobile devices, accounted for 11% of spending. Product Display ads, which are cost-per-click ads aimed at helping drive sales and traffic to an Amazon product detail page, accounted for 4% (the percentages don’t add up to 100% due to rounding).
“Amazon is still a new platform for many advertisers and many of our clients running on the platform are increasing their investments at a strong pace,” says Mark Ballard, senior director of research at Merkle. “While most of our clients who are advertising on the platform are manufacturers, it will be interesting to see what adoption looks like going forward.”
While Amazon’s ad business is growing quickly, for most brands it remains a small fraction of their digital marketing spending, given that most are dedicating a large share of their budgets to paid search and social media advertising.
Overall, retailers’ Google search ad spending rose 23% year over year in the fourth quarter, down slightly from its 24% growth in the third quarter. During the quarter, Google paid search clicks grew 8%, and the cost per click rose 14% over the same period a year earlier. Looking specifically at the retail and consumer goods vertical, Google search ad spending rose 24%, clicks increased 16% and the cost per click rose 7%.
Roughly 30% of Google search ad clicks stemmed from ads that leveraged Google’s advanced targeting tools. Those include: Customer Match, which enables a retailer to upload its email lists to find its customers when they search on Google; remarketing lists for search ads (RLSA), which let a retailer customize its search ads campaign for consumers who have previously visited its site; and Similar Audiences, in which Google targets users who are searching the same terms as users recently added to the merchant’s RLSA lists, such as Customer Match. That’s a 10 percentage point increase from 2016’s fourth quarter.
Phones accounted for 55% of Google search ad clicks in the fourth quarter, with desktop accounting for 37% and tablets 8%.
Product Listing Ads, or PLAs, the visually-oriented ads that present product images, prices and business names to users searching on Google played a key role in Google’s strong paid search growth.
PLA spending grew 32% during the quarter. Additionally, PLAs accounted for 55% of Google search ad clicks among U.S. advertisers, up from 48% a year earlier.
[infogram id=”plas_share_of_clicks” prefix=”My4″ format=”interactive” title=”PLAs share of clicks”]
For non-brand searches, which are general searches that don’t include a brand or product name, PLAs accounted for 77% of Google search ad clicks for retailers in the fourth quarter, up three percentage points from a year ago.
And, while it has been more than a year since Amazon.com Inc., No. 1 in the Internet Retailer 2017 Top 500, began to test PLAs late in the fourth quarter of 2016, the retail giant’s use of the ad format is largely limited to home goods and athletic apparel, Ballard says. Moreover, Amazon’s share of Google Shopping impressions actually fell in late November through early December across each broad product category where it has maintained an impression share greater than 10% since May 2017.
Google text ad spending rose 15% and non-brand text ads, which are text ads that don’t include a brand or product name, increased 12%.
Total visits driven by organic search rose 6% year over year, which was the strongest gain since 2015. Organic search visits driven by Google rose 8%.
Google also continued to expand its dominance of mobile search during the quarter. The search giant accounted for 96% of U.S. visits driven by a mobile organic search during the quarter, up three percentage points from a year earlier.
The report also finds that Facebook ad spending rose 20% year over year during the quarter, a steep decline from the roughly 40%-plus growth it generated in the first three quarters of the year. The cost per click rose 36%, the cost per thousand impressions jumped 20% and the number of impressions fell 27%.
Meanwhile, Instagram ad spending soared 122% during the quarter, thanks in part to a 99% increase in impressions. The cost per click rose 77% and the cost per thousand impressions increased 12%.
Facebook accounted for 82% of social ad spending during the quarter, and Instagram, which Facebook owns, accounted for 8%. Pinterest accounted for 7%, and other platforms made up the remaining 3%.
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