While spending growth on Amazon.com Inc.’s Sponsored Products and Sponsored Brands ad formats slowed in the second quarter, the retail giant’s ads continue to drive strong sales for retailers and brands, according to Merkle’s “Digital Marketing Report Q2 2019” that was released on Tuesday.
Spending on Sponsored Products—the 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—rose 12% in the second quarter, a slowdown from 19% growth in the previous quarter, according to Merkle, which bases its findings on its clients that have worked with the digital marketing vendor for at least 19 months and have not significantly changed their strategic objective or product offerings. However, sales from the ad format jumped 102%, roughly in line with the 101% increase in the first quarter.
It was a similar story with Sponsored Brands, 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. Spending on the ad format fell 2%, a dramatic decrease from 77% growth in the previous quarter, thanks in large part to Amazon opening up more inventory last August. Plus, sales from Sponsored Brands rose 53%.
Sponsored Products are the dominant ad format on Amazon, accounting for 86% of all Amazon Marketing Services spending. Sponsored Brands accounted for 13% and Product Display ads around 1%. Product Display ads, which are not available to sellers, are cost-per-click ads aimed at helping drive sales and traffic to an Amazon product detail page.
Although advertising on Amazon is distinct from advertising on Google due to a variety of factors that include a limited advertiser set on Amazon and a broader range of queries on Google, Merkle examined the median conversion rate of all advertisers active on each format in the second quarter to identify key trends. Merkle found that Amazon’s Sponsored Products and Sponsored Brands have significantly higher conversion rates than Google Shopping ads; Sponsored Products’ conversion rate is 240% higher than Google Shopping ads and Sponsored Brands’ rate is 165% higher than Google Shopping ads. That largely reflects differences in the ways consumers use Amazon and Google; consumers turn to Amazon to buy while they’re more likely to use Google to shop around, Merkle says.
Total paid search spending grew 14% in the second quarter, which was a slight deceleration from the first quarter. That marked the sixth-straight quarter of paid search spending deceleration.
In line with that broader trend, Google search ad spending rose 15% year over year in the second quarter, which was down from 16% growth in the first quarter. Click volume growth (10%) slightly declined while the cost-per-click growth (4.5%) was relatively unchanged.
The sharp split between Google’s two main search ads—text ads and Google Shopping ads—continued to grow during the quarter. Spending on Google Shopping ads grew 38% during the quarter, down from 41% growth in the previous quarter, while text ad spending fell 12% year over year. Google Shopping ads produced 63% of retailers’ total Google search ads clicks in the second quarter.
Google’s Showcase Shopping ad format, which look similar to PLAs but take a consumer to a Google-hosted store page, accounted for 8.5% of all Google Shopping clicks during the quarter, a slight increase from 8.0% in the previous quarter. Showcase Shopping ads officially launched in October 2017 as part of Google’s AdWords advertising program and, in May, Google announced it would be rolling out new inventory, including in Google Images and the Discover feed. The ads allow advertisers to combine lifestyle and product images in a single ad that Google displays in paid search results for specific keyword searches. The ads are geared toward brands looking to attract the attention of shoppers still in the beginning of the shopping process, when they are likely to use broad search terms like “living room furniture.” And, since late-2018, the ads can also contain video.
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 down from 37% in the previous quarter.
Phones accounted for 69% of retail and consumer goods advertisers’ Google search ad clicks in the second quarter, with desktop accounting for 25% and tablets 6%.
Total visits driven by organic search fell 6% year over year. Organic search visits driven by Google grew nearly 8%. Overall, organic search drove 23% of all visits during the quarter and 21% of mobile website visits.
Google continued to dominate mobile search during the quarter. The search giant accounted for 95% of U.S. visits driven by a mobile organic search during the quarter.
Instagram continued to grow in importance to Facebook Inc.’s bottom line during the second quarter; while ad spending on Facebook rose just 8% during the quarter, spending on Instagram ads grew 85%. That growth is the result of the effectiveness of Instagram ads, the report finds. Facebook impressions rose 25% while the cost-per-thousand impressions (CPM) fell 13%. Instagram impressions soared 208% while the CPM fell 40%.
The median advertiser that spends on Facebook and Instagram, spends 35% as much on Instagram as it does on Facebook. That cost per click is 19% that of Facebook, and Instagram generates 52% of the impressions that Facebook offers.