Meanwhile, clicks and impressions increase for paid search and Amazon turns its Google text ads back on in Q2 2020, according to the latest Digital Marketing Report by marketing agency Merkle.

With Google ad spend growing only 11% year over year in Q1 2020—the slowest in more than eight years—the coronavirus pandemic has created a “clear boundary between pre- and post-COVID-19” marketing results, according to marketing agency Merkle’s recently released “Digital Marketing Report Q1 2020.” However, the impact from the coronavirus pandemic depends on the advertising channel and the industry of the retailers.

“Short-term digital ad trends are going to vary considerably by channel, industry and even product category,” says Mark Ballard, vice president of research at Merkle. “We’re seeing relative strength for retailers that sell more essential items and for channels and ad formats that are more closely tied to direct response. Google search budgets are holding up better than YouTube budgets, while Amazon ads saw the most growth in Q1.”

Spending for paid search is still growing, but at a much slower rate

Overall, U.S. paid search spending across all search engines including Google, Yahoo, Bing, and DuckDuckGo, among others, grew 12% year over year in Q1 2020, down from 16% growth the previous quarter and from 14% in Q1 2019. According to Merkle, a strong first half of the quarter helped level out the sharp decline in ad spend, clicks and cost-per-click in the second half of March as a result of the coronavirus. The number of clicks grew 7% in Q1, compared with 10% the previous year. Cost-per-click, however, remained steady at 4% growth in both Q1 2019 and 2020.

As previously stated, search ad spend just on Google grew 11% in Q1, the lowest growth in more than eight years since Merkle started producing its report. Clicks and cost-per-click both grew less than the previous year, with clicks growing 9% in Q1 2020 compared with 11% in 2019 and cost-per-click growing 2% in 2020 compared with 5% in 2019.

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Showing the impact of COVID-19 on Google ad spend, Merkle broke out monthly spend and found an 11 percentage point deceleration between January and March. Spending was up 15% in January, but dropped to only a 4% growth in March.

Understandably, travel was the hardest-hit industry, down 21% for Google search ad spend in Q1 2020. However, B2B spending was up 28%, and retail and consumer goods grew 13%.

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Conversion rates for retail search ads on Google have been on an upward climb since January 2020, with an even sharper increase since March. However, Google advertising volume trends vary depending on the product category, according to Merkle.

“We work with a lot of retailers that have a large bricks-and-mortar presence, and we’ve found that with limits to in-store shopping in place, online conversion rates have picked up significantly,” Ballard says. “For example, by the end of March, the average sales per click generated by search ads was running 30-40% higher for our retail clients compared to January. Typically, we’d expect to see that metric hold flat throughout the quarter.”

Essential retailers see an increase in impressions, but nonessential retailers fall to the wayside

Overall visits to websites from organic search results fell year over year for every search engine Merkle tracks except DuckDuckGo, which grew 38% in Q1. Overall visits—which include mobile and desktop views—fell 13% for Google, 27% for Yahoo and 26% for Bing.

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Within retail exclusively, search trends depended on whether or not merchants were considered essential or nonessential. Impressions for essential retailers grew 29% and clicks 53% year over year, whereas nonessential retailers had impressions fall 14% and clicks 31%.

With Amazon mitigating fulfillment for sellers, daily ad spend has decreased

Amazon’s share of Google text ads has drastically decreased, hitting an all-time low in February 2020. Its Google shopping presence, however, maintained consistent trends until early March, as the coronavirus began hitting the United States.

“Going back to 2012, when Google first began providing advertisers with Auction Insights into specific competitors, Merkle had never seen Amazon turn off its Google text ads for a full week until March 2020,” Merkle says.

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As the coronavirus continued to spread, more shoppers turned to online retail, particularly Amazon. Merchant spend on ads placed on the Amazon marketplace varied depending on the month, category and type of ad. Amazon offers several types of ads on its marketplace, including: sponsored product, sponsored brand, top-of-search, video ads and more. Sponsored product spend rose 67% year over year, clicks grew 87% and cost-per-click fell 10%. Sponsored brand spend also accelerated, growing 118% year over year, with clicks increasing 43%.

However, during the final week of March, marketplaces merchants decreased their ad spend on Amazon. Many advertisers faced issues with Amazon limiting the fulfillment of nonessential products. Other marketplace merchants simply ran low on inventory or had lower ad budgets as retailers regrouped to formulate a successful plan to combat shifting consumer spend during the pandemic.

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Sellers are battling for top-of-search ad placement, according to Merkle. While these ads only account for 3% of sponsored products ad impressions in Q1, they produced 51% of sales. For sponsored products ads, impressions were highest on product detail pages in Q1 at 85%.

Impressions for top-of-search were higher for sponsored brands advertisements at 39% but were still lowest in the two categories Merkle tracks for this type of advertisement. Top-of-search still generated the most sales at 89%.

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Instagram impressions fare better than Facebook

Separating Instagram from Facebook, spending on both social platforms grew year over year, but impressions fell 13% for Facebook. When looking at brands that run both Instagram and Facebook ads in Q1, Instagram accounted for 27% of total spending and 34% of impressions.

On Instagram, story ads represented 28% of impressions and accounted for 27% of total Instagram advertising spend.

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The Q1 2020 Digital Advertising Merkle report is based on the clients that have actively worked with the digital marketing vendor for at least 19 months, haven’t significantly changed their strategic objectives or product offers, and have met a minimum ad-spend threshold not disclosed. 

 

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