Instagram has become a significant piece of Facebook’s revenue mix; the image-focused social network accounted for 27% of Facebook’s ad revenue in the fourth quarter, an eight percentage point jump from the third quarter and triple the 9% share it contributed in the first quarter, according to Merkle’s “Digital Marketing Report Q4 2018” that was released on Tuesday.
That growth stems in large part from brands significantly boosting their spending on the platform. Advertisers that have advertised on Instagram since the fourth quarter of 2017 increased their spending on Instagram ads by 138% during the crucial fourth quarter. That’s despite the cost per thousand impressions (CPM) falling 17% during the quarter. In part, that reflects advertisers’ use of less expensive ads within Instagram Stories.
Instagram’s growth is crucial to Facebook’s success, the report notes, because the Facebook platform has started to mature as an advertising platform. Excluding Instagram from Facebook’s ad revenue, Merkle finds that ad spending on Facebook slowed to 10% in the fourth quarter and both impressions and CPM rose just 5% year over year.
That slowdown stems from Facebook’s inability to add more ads to the platform, not the result of advertisers pulling campaigns off the platform as a result of the negative news reports surrounding the social media giant, the report notes.
Facebook’s mobile ad network, Audience Network, is the other source of Facebook revenue. However, the platform, which enables marketers to place ads on apps outside of Facebook using Facebook targeting, is used by a relatively small share of all Facebook advertisers. As a result, it only accounted for 5% of Facebook’s ad revenue during the quarter, down from 11% a year earlier.
Like Instagram, Pinterest’s ad business is also growing quickly. The median brand that has advertised on Pinterest since 2017’s fourth quarter increased its spending on the platform 100% year over year. That stems, in part, from CPM jumping 57% during the quarter.
Google search ad spending grew 18% year over year during the fourth quarter. However, click volume growth (which rose 10%) overtook cost-per-click (CPC) increases as the key driver behind those spending increases.
There was sharp split between Google’s two main search ads, text ads and Google Shopping ads during the quarter. Spending on Google Shopping ads grew 42% during the quarter. That’s the highest growth rate for Shopping ads since mid-2016. However, text ad spending fell 9% year over year. For retailers, Google Shopping ads accounted for 63% of all Google search ad clicks, which was an all-time high.
Google’s Showcase Shopping ad format, which look similar to PLAs but take a consumer to a Google-hosted store page, accounted for 5.7% phone Shopping ad clicks during the quarter, up from 5.1% from the previous quarter and 1.6% during the same time a year earlier. Showcase Shopping ads officially launched last October as part of Google’s AdWords advertising program. 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.”
38% of Google search ad clicks stemmed from ads that leveraged Google’s advanced targeting tools. That’s an all-time high. 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 up from 30% in the previous quarter when the launch of Apple Inc.’s “intelligent tracking prevention,” or ITP, kept retailers from being able to leverage Google’s remarketing lists for search ads (RLSA) product.
Phones accounted for 65% of retail and consumer goods advertisers’ Google search ad clicks in the fourth quarter, with desktop accounting for 28% and tablets 8% (the percentages add up to 101% due to rounding).
The report also notes that Amazon.com Inc.’s use of Shopping ads increased toward the end of the fourth quarter; the retail giant accounted for 48% of Google Shopping impressions in the home goods category, where it has been a top competitor since the end of 2016, save for a brief period when it dropped out of Google Shopping Ad listings.
Total visits driven by organic search rose 6% year over year. Organic search visits driven by Google grew nearly 9%, the largest percentage increase since the second quarter of 2015, which was just before the search giant boosted its ad inventory. The result was that the share of total site visits produced by organic search inched up to 26% and just under 25% on mobile devices. That’s only the second increase since the first quarter of 2017.
Google continued to dominate 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 one percentage point from a year earlier.
Amazon’s advertising offerings continued to grow during the fourth quarter as Amazon Sponsored Products and Sponsored Brands, which had been called Headline Search Ads, grew 15% and 26% year over year, respectively. While that was markedly slower than its massive growth during the previous few quarters, sales attributed to Sponsored Products and Sponsored Brands increased 71% and 131%, respectively, as advertisers with more mature campaigns optimized their traffic. One way they did so was via the use of automated Sponsored Brands bidding functionality via API, which Amazon introduced in the second half of 2018.
The cost per click for Sponsored Products fell 26%, and the cost per click for Sponsored Brands dipped 11%.
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. Sponsored Brands 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.
Sponsored Products are the dominant ad format on Amazon, accounting for 87% of all Amazon Marketing Services spending. Sponsored Brands accounted for 12% and Product Display ads just 1%. Product Display ads are cost-per-click ads aimed at helping drive sales and traffic to an Amazon product detail page.