Amazon.com Inc.’s ad business skyrocketed in the second quarter, with triple-digit increases in investment in the retailer’s two most popular formats, Sponsored Product and Headline Search ads, according to digital marketing firm Merkle’s “Merkle Digital Marketing Report Q2 2018.”
Spending on the retail giant’s Sponsored Product ads, which accounted for 88% of all Amazon search and product detail paid ad spending in the second quarter, was up from 165% a year earlier for the median Merkle client during the 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.
Ad spending on Headline Search ads, which accounted for 11% of spending, soared 162% for the median Merkle client during the quarter. Headline Search ads 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. Product Display ads, which are cost-per-click ads aimed at helping drive sales and traffic to an Amazon product detail page, accounted for just 1% and spending on the ads decreased 55% for the median Merkle client.
Spending on Sponsored Product ads is soaring because they consistently produce the highest value among Amazon Marketing Services formats, the report says. Headline Search ads produced a sales per click about 10% less than Sponsored Product ads, and Product Display ads had a sales per click about 50% lower than that of Sponsored Product ads during the quarter for the median Merkle advertiser.
Merkle also compared Amazon’s ads to Google Shopping ads and found that Amazon’s two leading ad formats dramatically outpace the the search giant’s ads. For example, Sponsored Product ads converted 248% higher than Google Shopping ads for the median advertiser during the quarter, and Headline Search ads converted 250% higher. However, it’s important to note that it isn’t a direct comparison because many advertisers on Google don’t sell on Amazon and don’t bid on Amazon’s ad formats, while some Amazon sellers don’t use Google Shopping ads.
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. Amazon is No. 1 in the Internet Retailer 2018 Top 500.
Search ad spending
The report also found that retailers’ Google search ad spending rose 18% year over year in the second quarter. During the quarter, Google paid search clicks grew 7%, and the cost per click rose 10% over the same period a year earlier. Across all advertisers, Google search ad spending rose 17%, clicks increased 10% and the cost per click rose 7%.
Roughly 37% 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 significant 16 percentage point increase from a year earlier.
Phones accounted for 61% of retail and consumer goods advertisers’ Google search ad clicks in the second quarter, with desktop accounting for 31% and tablets 8%.
Google Shopping ads, 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.
Google Shopping ad spending grew 31% during the quarter. Additionally, PLAs accounted for 59% of Google search ad clicks among U.S. advertisers and 82% of non-brand ad clicks, which are general searches that don’t include a brand or product name.
[infogram id=”plas_share_of_clicks” prefix=”Qer” format=”interactive” title=”PLAs share of clicks”]
Google text ad spending rose 6% and non-brand text ads, which are text ads that don’t include a brand or product name, increased 13%.
Total visits driven by organic search rose 2% year over year. Organic search visits driven by Google also rose 2%.
Social media ad spending
The report finds that social networks drove 3.7% of all site visits in the second quarter, up from 2.9% a year earlier. On mobile devices, social networks accounted for 4.6% of site visits.
The report also finds that Facebook ad spending rose 40% year over year during the quarter. The cost-per-thousand impressions jumped 70% and the number of impressions fell 17%.
Meanwhile, Instagram ad spending soared 177% during the quarter, thanks in part to a 209% increase in impressions. The cost-per-thousand impressions decreased 10%.Favorite