It’s a good time for retailers and brands to spend on Amazon.com Inc.’s Sponsored Products and Sponsored Brands ad formats.
Merkle clients that advertise on Amazon boosted their spending on the two ad formats by 19% and 77%, respectively, in the first quarter, according to Merkle’s “Digital Marketing Report Q1 2019” that was released on Tuesday. And that spending increase helped boost sales stemming from Sponsored Products 101% and from Sponsored Brands 202%.
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 85% of all Amazon Marketing Services spending. Sponsored Brands accounted for 13% and Product Display ads around 2%. Product Display ads are cost-per-click ads aimed at helping drive sales and traffic to an Amazon product detail page.
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. Even so, examining the median conversion rate of all advertisers active on each format in the first quarter, Merkle found that Amazon’s Sponsored Products and Sponsored Brands have significantly higher conversion rates than Google Shopping ads; Sponsored Products’ conversion rate is 219% higher than Google Shopping ads and Sponsored Brands’ rate is 123% higher than Google Shopping ads.
Total paid search spending grew 14% in the first quarter, a slowdown from 16% growth in the previous quarter, thanks in part to declining spending at Bing and Yahoo. That marked the fifth straight quarter of paid search spending deceleration.
Google search ad spending rose 16% year over year during the first quarter, which was down from around 18% growth in the fourth quarter. Click volume growth (11%) accelerated for the third straight quarter while the cost-per-click (CPC) growth (5%) decelerated for the fifth straight quarter.
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 41% during the quarter, just one percentage point slower than the previous quarter (which was the highest growth rate for Shopping ads since mid-2016), while text ad spending fell 12% year over year. Google Shopping ads produced 65% of retailers’ total Google search ads clicks in the first quarter, a two percentage point jump from the fourth quarter.
Google’s Showcase Shopping ad format, which look similar to PLAs but take a consumer to a Google-hosted store page, accounted for 8.0% of all Google Shopping clicks during the quarter, a marked increase from 3.0% during the same time a year earlier. Showcase Shopping ads officially launched in October 2017 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.” And, since late-2018, the ads can also contain video.
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 down slightly from 38%.
Phones accounted for 67% of retail and consumer goods advertisers’ Google search ad clicks in the first quarter, with desktop accounting for 26% and tablets 7%. That’s an eight percentage point increase from a year earlier.
The report also notes that Amazon’s use of Shopping ads hit an all-time high during the quarter; the retail giant accounted for 51% 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 fell 2% year over year. Organic search visits driven by Google grew nearly 6%, down from 12% growth in the previous quarter. The result was that organic search drove 26% of all visits during the quarter and 24% of mobile website visits.
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.
Instagram continued to grow in importance to Facebook Inc.’s bottom line during the first quarter; while ad spending on Facebook fell 2% during the quarter and spending on Instagram ads grew 44%. The first quarter was the first time Merkle has observed a year-over-year decline in spending on Facebook’s primary platform.
Meanwhile, Instagram impressions rose 29% and the cost-per-thousand impressions (CPM) rose 11%.
While fewer brands advertise on Pinterest than Facebook and Instagram, Merkle found that those that do are generating strong results. Comparing the median Pinterest advertiser to the median Facebook advertiser, Merkle found that advertisers are spending 19% more on Pinterest than Facebook and generating 201% more impressions at 42% lower CPM.
Overall, spending on paid social spending grew 24%, outpacing traditional display ads’ 12% growth.