U.S. advertisers’ spending on Google search ads accelerated in the third quarter for the first time in nearly two years, according to Merkle’s “Digital Marketing Report Q3 2019” that was released on Tuesday. The report bases its findings on Merkle’s 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.
Merkle clients boosted their Google search ad spending 16% during the third quarter, up from 15% growth in the second quarter. While the cost-per-click growth was unchanged at 4.5% year over year, total clicks grew 11% (up from 10% in the previous quarter) thanks in part to the first growth in Google text ad spending in a year.
Google text ads spending grew 9.5% after four straight quarters of declining spending. One reason for that growth is that Google has been expanding its definition of keyword close variants, which helps retailers and brands have their ads appear when consumers use keywords that are similar, but not identical, to the keyword a business bid on. The tool allows retailers to reduce the need to build out exhaustive keyword lists to reach consumers.
That growth contrasts sharply with Google Shopping ad spending, which grew 24%, a slowdown from 38% growth in the second quarter. The divergent trend lines between text ads and Shopping ads meant that Google Shopping’s share of retailers’ search ad clicks slipped slightly to 62% during the quarter.
But even as text ads ate into Google Shopping’s click share, desktop Shopping ads were far more lucrative than text ads; the Shopping revenue per click on desktop was 21% higher than text ad revenue per click. However, that trend didn’t hold on phones where Shopping revenue per click was 5% less than text ads.
Within Google Shopping, the Showcase Shopping ad format, which looks similar to product listing ads (PLAs) but take a consumer to a Google-hosted store page, accounted for 10% of all Google Shopping clicks during the quarter, an increase from 8.5% in the previous quarter and more than double the share from a year ago. 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.”
32% of Google search ad clicks stemmed from ads that leveraged Google’s advanced targeting tools, up from 30% in the previous quarter. 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.
Phones accounted for 70% of retail and consumer goods advertisers’ Google search ad clicks in the third quarter, with desktop accounting for 23% and tablets 7%.
Total visits driven by organic search fell 9% year over year. Organic search visits driven by Google fell 11%. Overall, organic search drove 22% 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.
In the lead-up to Amazon.com Inc.’s Prime Day sale, the retail giant’s presence in Google Shopping ad auctions hit new highs. While Amazon briefly paused its spending during the two-day sale, it then further increased its spending as it moved into other product categories. For example, on Aug. 26, Amazon accounted for 70% of Google Shopping home goods impressions within keywords that Merkle identified as important to the category. And in apparel, a category in which Amazon had had little Google Shopping presence until recently, it accounted for 52% of apparel impressions within important keywords—also on Aug. 26.
While Amazon ramps up its spending on Google ads, a number of advertisers significantly increased their spending on Amazon’s Sponsored Products and Sponsored Brands ad formats.
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 35% in the third quarter, up from 12% growth in the previous quarter, according to Merkle. And sales generated from those ads rose 69%.
While Sponsored Products accounted for 85% of Amazon ad spend in the quarter, Sponsored Brands—the keyword-targeted, cost-per-click search ads that appear at the top of the first page of search results on desktop and mobile devices—that accounted for 9% of Amazon ad spend produced similar results. Spending on the ad format rose 20%, a significant increase from a 2% decline in the previous quarter. And sales from Sponsored Brands rose 87%.
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 third 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 359% higher than Google Shopping ads and Sponsored Brands’ rate is 296% 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.
Instagram continued to grow in importance to Facebook Inc.’s bottom line during the third quarter; while ad spending on Facebook rose just 12% during the quarter, spending on Instagram ads grew 44%. That growth is the result of the effectiveness of Instagram ads, the report finds. Facebook impressions rose 20% while the cost-per-thousand impressions (CPM) fell 7%. Instagram impressions soared 138% while the CPM fell 39%.
The median advertiser that spends on Facebook and Instagram spends 29% as much on Instagram as it does on Facebook. That cost per click is 26% that of Facebook, and Instagram generates 34% of the impressions that Facebook offers.