Amazon.com Inc.’s advertising business is booming.
The median advertiser’s investments in Amazon’s two most popular formats, Sponsored Product and Headline Search ads, skyrocketed 96% and 90% respectively compared to the same period a year earlier, according to digital marketing firm Merkle RKG’s “Merkle Digital Marketing Report Q1 2018.” A significant share of that increased spending stemmed from the rising cost per click; the cost per click for Sponsored Product ads jumped 65% year over year and the cost per click for Headline ads rose 128%.
Sponsored Product ads accounted for 86% of all retailer search and product detail paid ad spending on Amazon in the first quarter, up one percentage point from the previous quarter. 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 10% of paid ad spending on Amazon. 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%. Sponsored Products and Headline Search ads are available to all Amazon sellers, while Product Display ads are available to manufacturers and wholesalers but not marketplace sellers.
Despite the rapid growth of Amazon’s ad business, that channel remains a relatively minor part of most merchants’ digital marketing spending as most dedicate a major share of their budgets to paid search and social media advertising.
Overall, retailers’ Google search ad spending rose 20% year over year in the first quarter, down slightly from its 23% growth in the fourth quarter. During the quarter, Google paid search clicks grew 7%, and the cost per click rose 13% over the same period a year earlier. Looking specifically at the retail and consumer goods vertical, Google search ad spending rose 21%, clicks increased 16% and the cost per click rose 4%.
Roughly 34% of Google search ad clicks stemmed from ads that used Google’s advanced targeting tools, a four percentage point jump from the previous quarter. Those include: Customer Match, which allows 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.
Smartphones and tablets accounted for 58% of retail and consumer goods Google search ad clicks in the first quarter, with desktop accounting for 36% 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 40% during the quarter, which was the highest rate of growth in nearly two years. Additionally, PLAs accounted for 60% of Google search ad clicks among U.S. advertisers, up from 55% the previous quarter.
Meanwhile, Google text ad spending dramatically slowed down during the quarter to 4%.
Spending on non-brand Google text ads and PLAs grew 17% during the quarter, down five percentage points from the fourth quarter. Spending on non-brand text ads was particularly weak, as Google Shopping ads appeared to have cannibalized text volume.
Among participating brands, Showcase Shopping ads, which look similar to traditional PLAs but take a consumer to the advertiser’s Google-hosted store page, accounted for nearly 3% of mobile Google Shopping clicks in the first quarter, more than double the click share from the previous quarter. Part of that growth may stem from a test that Google ran during the quarter in which it tested a separate carousel for Showcase Shopping ads underneath a carousel featuring traditional Google Shopping ads.
Notably, Amazon’s share of Google Shopping ad impressions fell throughout the first quarter to levels not seen since the second quarter of 2017. In fact, among the four categories (general home goods, furniture, office supplies and novelty gifts) in which Amazon is most aggressively bidding on Google Shopping ads, office supplies was the only category in which Amazon’s share of impressions at the end of the quarter was higher than it was to start the second half of 2017. Amazon is No. 1 in the Internet Retailer 2017 Top 500,
Total visits driven by organic search fell by less than half a percentage point. Organic search visits driven by Google fell 0.5%.
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 two percentage points from the previous year. It also accounts for 93% of all organic search-driven visits, a three percentage point jump compared to the previous year.
The report also finds that Facebook ad spending, excluding Instagram, grew 48% during the quarter. The cost per click rose 10%, the cost per thousand impressions jumped 70% and the number of impressions fell 5%.
Instagram spending jumped 62% year over year as impressions grew 101%, Merkle says. The cost per click rose 30% and the cost per thousand impressions fell 8%. Instagram is significantly smaller than Facebook in terms of ad spend; the median brand that advertises on both platforms invests roughly 9% as much spend on Instagram as it does on Facebook.
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