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.

Q2 2020—the first full quarter affected by the coronavirus pandemic—shows the jolting impact that COVID-19 has had on digital marketing, according to marketing agency Merkle’s latest “Digital Marketing Report.” Ad clicks and online traffic increased nearly across the board as store shoppers moved online, but cost-per-click drastically fell as retailers struggled or were unwilling to pay higher premiums, according to Merkle.

“For those brands that do have an offline presence, even though online might have been looking great, the net story there was sales were down in late March and April,” says Mark Ballard, vice president of research at Merkle. “So, a lot of those ad dollars online are meant to [generate offline] sales too. If offline sales are way down, you’re not going to allow your CPCs [cost-per-clicks] to be as high as they were previously.”

Cost continues to decline while clicks increase

Overall, U.S. paid search ad spending across all search engines including Google, Yahoo and Bing, among others, grew 8.9% year over year in Q2, down three percentage points from Q1. However, clicks grew 38.0%, the highest growth in more than five years, according to the past Merkle digital advertising reports available.

Yet, cost-per-click, or the actual price each advertiser pays for one click in a pay-per-click (PPC) marketing campaign, fell 21.1% in Q2.

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The U.S. government’s stimulus packages and extended unemployment benefits helped to encourage shopper spending and total retail sales beginning in late April, extending into May, with a final boost in June, Ballard says. But the uncertainty around the pandemic keeps CPC trending down.

“Next month, we may not have those extended unemployment benefits unless something happens soon,” Ballard says. “And if the demand is not there, I don’t see how CPCs are going to catch back up to where they were. Right now, to me, that’s the biggest question mark.”

Even Google CPC was down 21.9% year over year in Q2 from 2.2% in the previous quarter. Clicks and ad spend, however, are still growing at 39.0% and 8.6%, respectively. This paid search ad spend on Google was nearly three percentage points lower than Q1, which was formerly the lowest growth in the 8 years Merkle has produced its digital marketing report.

Across industries, retail and consumer goods have had the healthiest growth in ad spend and clicks but have also had the second-strongest decrease in ad spend for Q2. Retail grew 11.0% year over year in ad spend and 41.9% for clicks and fell 21.8% in CPC for Q2 2020. In comparison, the travel sector decreased 47.4% in ad spend, 34.2% in clicks and 20.1% in cost-per-click.

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Google Shopping product listing ads (PLAs) have continued to fall over the past year, hitting a low of 6.7% growth in Q2 year over year. This trend will likely continue as earlier this year, Google made the decision to allow its Shopping search ads to primarily feature free product listings instead of paid ads.

Organic growth begins to recover

Overall growth in organic Google search visits across all industries bounced back from a five-quarter decline beginning in Q1 2019 to 32.9% growth year over year in Q2 2020. Mobile also recovered with a 34.9% growth year over year.

By industry, the travel sector continues to be hard hit with a 50.5% decline in organic Google site visits year over year in Q2. Retail and consumer goods grew 42.5% in the same quarter, with much of that growth a result of consumers searching for essential goods. By retail category, essential goods searches increased 69.5%, other nonessential goods increased 41.2% and apparel decreased 1.5% year over year in Q2.

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Amazon turns Google text ads back on in Q2

While Amazon prioritized fulfilling essential items because of the increased demand for online ordering, logistical issues plagued the company in early Q2, resulting in CPCs decreasing 41%, according to Merkle. Spending for Amazon sponsored product ads rose 22% year over year, but down from a 67% growth in the previous quarter.

At the end of Q1 2020, Amazon shut down its Google text ad program for 12 weeks from March until the second week of June. Amazon made this first-ever decision after increased pressures from higher ordering frequency as even more consumers turned to online shopping as a result of the coronavirus. Amazon resumed its text ad spend on Google in June, at roughly a quarter of its former impressions.

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Instagram continues to outperform Facebook advertising

Instagram continues to fare better than Facebook in terms of spend, impressions and cost-per-thousand impressions (CPM). Facebook—excluding Instagram—ad spend slowed to 4.2% growth year over year in Q2, compared with a 19% growth in the previous quarter. In comparison, Instagram ad spend grew 30.4%. Cost-per-impression, which is similar to CPC for social media, decreased 16.7% on Facebook and 10.4% on Instagram year over year in Q2.

The Q2 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.