Digital advertisers are beginning to find their footing during the coronavirus pandemic, with ad search and social spend increasing across most channels, according to Merkle's latest Digital Marketing Report. Plus, Amazon Sponsored ads have a better conversion rate than Google Shopping.

As online retailers’ footing grows steadier during the coronavirus pandemic, digital marketing is beginning to recover in Q3 2020 from a previous quarter of slow growth and declines in paid and organic search. However, the industry as a whole is not yet back to normal, as high click rates and growth remain, while cost-per-click continues to fall. This is according to marketing agency Merkle’s latest “Digital Marketing Report.”

Cost-per-click slowly begins to recover

Overall U.S. paid search ad spending grew almost 10% year over year across all search engines Merkle measures, including Google, Yahoo, Bing and DuckDuckGo, among others. This is up one percentage point from Q2 2020, but still down two percentage points from Q1.

However, clicks are still growing—at a rate of 23% this quarter—as the pandemic has driven retail activity online, but they are beginning to cool compared with the previous quarter’s 38% growth. As ad spend and clicks trend more neutral, cost-per-click (CPC) is also starting to even out, though it still declined 11% year over year in Q3 2020.

Google search ad spending, clicks and CPC saw nearly identical growth, as ad spend increased 11% year over year, clicks 24% and CPC decreased 10%. The decline in CPC in Q3 is likely the result of increased competition and advertisers becoming better at managing “the logistical challenges of the pandemic,” according to the Merkle Report.


By industry, overall Google search spending increased 12% year over year for retail and consumer goods, whereas CPC fell 9%. Clicks increased 22% year over year, following a similar trend to overall Google and paid search results this quarter. Compared with last quarter, this is a one percentage point increase in ad spend, a 20 percentage point decrease in clicks, and an 11 percentage point increase in cost-per-click.

Retail and consumer goods see the best organic Google search growth by sector

The retail and consumer goods segment has seen the best overall organic Google search over the past two quarters, according to Merkle. Organic search visits on Google were up 42% year over year in Q3 2020 for this segment, compared with only 10% for financial services, 20% for insurance companies and a 37% decrease for travel.


Meanwhile, search visits by retail category saw essential goods searches are slowing as the pandemic continues. Essential goods searches increased 56% in Q3 2020 year over year, which is a 14 percentage poimt drop compared with Q2. Other nonessential retail search visits increased 54%. The largest change, however, comes from the apparel segment, which decreased in Google organic search visits by 11% in Q3 year over year compared with a 1.5% decrease in Q2 year over year.

Overall Google organic search visits to brand websites continue to trend upward, with a 28% increase in Q3 year over year. Mobile devices had a 33% increase in search visits year over year.


Amazon ad spend increases 50%

Prime Day being pushed back to Q4 from Q3 didn’t affect Amazon sponsored product ads as much as anticipated, as ad spend still increased 50% year over year in Q3 2020. Cost-per-click significantly improved for Amazon sponsored product ads from the previous quarter, but it still fell 8.5% in Q3 year over year. Clicks and sales growth both slowed in Q3 as some retail sales returned to physical locations, according to Merkle, but both still had healthy growth, with clicks up 64% year over year and sales up 67%. Ultimately, marketplace sellers spent more on Amazon Sponsored Product ads in Q3 than Q2 2020 (and more than the previous year), but the cost for each click on these ads also increased.

According to Merkle, Google users are more likely to research online but complete a purchase in brick-and-mortar stores than Amazon users, resulting in conversion rates for Amazon to consistently outperform Google shopping ads. Merkle compares Amazon Sponsored Product ad conversion rates to both Amazon Sponsored Brands and Google Shopping ads. For Q3 2020, Google Shopping ad conversion rates were 26% as high as Sponsored Product conversion rates. This means that 26% of Google Shopping ads had as high of a conversion rate as Amazon Sponsored Product ads.


Instagram advertising continues to outperform Facebook

Across platforms, paid social ad investment saw a 19% growth year over year in Q3 2020. Comparatively, display ads saw a 3% decline in investment. Both are an improvement from Q2 2020, when paid social ad investment only grew 11% and display investment decreased 11%.

Instagram continues to outperform Facebook for spend, impressions and cost-per-impression (CPM). Facebook—not including Instagram—ad spend recovered from Q2 2020, but only saw a 12% growth in Q3 year over year compared with a 34% growth in the same category for Instagram. Impressions for Facebook have remained at a 25% growth rate year over year in Q3, the same percent growth as Q2 2020. Instagram impressions only grew 38% year over year in Q3, compared with a 46% growth in the previous quarter.


While not as popular as Facebook and Instagram, smaller social platforms are beginning to see an increase in ad spend budgets by participating brands in Merkle’s report. Pinterest and Snapchat now account for 17% of ad spend budgets, whereas Twitter accounts for 11% and LinkedIn 6%.


The Q3 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.