Q3 1 7 Q320Q3 2017 - Amazon S3 · Spending on Bing Product Ads grew 27% Y/Y, its strongest growth...

Q3201 7

Q3

1 720

DIGITAL MARKETING REPORTQuarterly Benchmarks for Your Digital Marketing Program

Q3 2017

03 EXECUTIVE SUMMARY

w 12 HIGHLIGHTThe Role of Audiences in Google Search Grows

PAID SEARCH05

ORGANIC SEARCH & SOCIAL1 8DISPLAY & PAID SOCIAL22

26 MARKETPLACES & CSEs

30 ABOUT MERKLE & METHODOLOGY

TABLE OF CONTENTS

Click on the icons at the top of each page to jump between sections quickly.

CSEMERKLE DIGITAL MARKETING REPORT Q3 2017 CSE 2DISPLAY & PAID SOCIALSEO & SOCIALEXEC SUMMARY PAID SEARCH

MERKLE DIGITAL MARKETING REPORT Q3 2017 3EXEC SUMMARY CSEDISPLAY & PAID SOCIALSEO & SOCIALPAID SEARCH

EXECUTIVE SUMMARY

NEW & NOTABLE FOR Q3 2017

Google search ad spending growth remained strong in Q3 2017, rising to 24% year over year (Y/Y) in the US, while dipping slightly to 13% growth in the UK. Mobile and Google Shopping continued to drive growth, but desktop spending remained resurgent following a late 2016 change by Google to allow advertisers to segment desktop and tablet search ad bids.

Google search advertisers are facing rising average cost per click (CPC), particularly for the Product Listing Ads (PLAs) that power Google Shopping. After falling 6% Y/Y a quarter earlier, PLA CPCs grew 4% in Q3 2017. Much of this shift can be attributed to the launch of PLAs on image search in May 2016, which had been depressing Y/Y CPC growth for PLAs, due to the lower CPCs associated with image search clicks.

After it was fined €2.42 billion in June for breaching EU antitrust rules with Google Shopping, Google introduced changes in late September to allow comparison shopping services to compete in Google Shopping auctions. The move happened too late to meaningfully impact Q3 performance, but may further drive up on Shopping CPCs moving forward. In the UK, PLAs produced 57% of retailers’ Google search ad clicks in Q3.

The strength of PLAs has helped keep retailer search ad spending growing at a robust pace, even as the broader industry is facing many challenges, including from the growth of Amazon. Elsewhere, the travel industry produced relatively low search spending growth in Q3, as major weather events and weaker international travel appeared to hurt ad investment.

Though still the largest single source of site traffic for many brands, organic search has faced an uphill battle against the increased monetization of search results pages and growing competition from social media as a site visit driver. Organic search visits fell 3% Y/Y in Q3 2017, and organic’s share of all site visits slipped a point to 26%.

Despite concern over Facebook’s ability to continue growing ad impressions, ad spend on the social media giant rose 40% Y/Y in Q3, while paid social spend increased 29% overall. Advertisers invested 84% of all Facebook spend in ads featured in the News Feed, which have a higher click-through rate (CTR) than ads featured less prominently in the right-hand rail and are a favorite of brands running direct response-focused campaigns.

As has long been the case, mobile devices accounted for most Facebook ad spend, with desktop computers accounting for only 30% of spend. November will mark the one year anniversary of Facebook shuttering FBX, its desktop-focused remarketing solution.

Amazon ad investment increased significantly quarter-to-quarter across all of Amazon’s ad formats. Sponsored Products Ads are clearly the most heavily targeted format and accounted for 82% of all Amazon ad spend, though Headline Search Ads and Product Display Ads did grow faster quarter over quarter (Q/Q) in terms of spend.

The strong Q/Q performance of Amazon ads is indicative of how new these formats are relative to a more mature platform like Google Shopping, which saw Q/Q declines in spend, due to typical seasonal consumer spending habits.

EXECUTIVE SUMMARY

MERKLE DIGITAL MARKETING REPORT Q3 2017 4EXEC SUMMARY CSEDISPLAY & PAID SOCIALSEO & SOCIALPAID SEARCH

PAID SEARCH · Across all platforms, paid search spending grew 22% Y/Y in Q3 2017, up from 20% growth in Q2. Click

growth slowed modestly to 17% Y/Y, but CPCs rose over 4%.

· Google search ad spending grew 24% Y/Y, as PLA spending increased 47% and text ad spending increased 15%. Google CPCs rose 4% in Q3 2017, following flat growth a quarter earlier.

· Combined search spending across Bing Ads and Yahoo Gemini grew Y/Y for the first time in two years, coming in 6% higher. Spending on Bing Product Ads grew 27% Y/Y, its strongest growth rate since 2015.

· Google’s Customer Match, remarketing lists for search ads (RLSA), and similar audience targeting capabilities impacted over 20% of Google search ad clicks in Q3 2017, up sharply from a year earlier. These traffic segments also produced above average CTR, conversion rate, and average order value (AOV).

ORGANIC SEARCH & SOCIAL · Organic search visits fell 3% overall in Q3 2017, as phone search visits grew 9%, but tablet visits fell

11%, and desktop visits fell 10%. Google organic search visits grew less than 1%.

· Mobile devices, including phones and tablets, produced 54% of organic search visits in Q3 2017, up from 51% a quarter earlier. Google accounted for 95% of US mobile organic search visits and 91% of all US organic search visits.

· Social media platforms produced 4% of all site visits in Q3 2017, up nearly a point from a year earlier. Mobile devices accounted for 74% of site visits produced by social media.

DISPLAY & PAID SOCIAL · Spending on Facebook ads grew 40% Y/Y in Q3 2017, down from 56% growth in Q2. Mobile produced

70% of Facebook spend, while News Feed ads produced 84%.

· Traditional display advertising spending grew an impressive 72% in Q3 2017, as advertisers were active on 19% more platforms than a year earlier.

· Mobile devices accounted for 83% of all YouTube ad investment, compared to 46% for the Google Display Network (GDN).

MARKETPLACES & CSEs · Sponsored Product Ads received 82% of total spending on Amazon ad formats, with Headline Search

Ads receiving 10% and Product Display Ads 8%. Sponsored Product Ad spending grew 53% Q/Q, compared to seasonal declines on Google Shopping.

· Among Amazon ad formats, Sponsored Product Ads produced the highest average sales per click in Q3 2017, but Headline Search Ads produced an average CTR that was five times as high as that for Sponsored Product Ads.

· The eBay Commerce Network (ECN) accounted for 54% of US comparison shopping engine (CSE) spend in Q3 2017. That was down from 68% in Q1 2017 as ECN product ads were removed from ebay.com in May.

PAID SEARCH

CSEMERKLE DIGITAL MARKETING REPORT Q3 2017 5PAID SEARCH CSEDISPLAY & PAID SOCIALSEO & SOCIALEXEC SUMMARY


10%

20%

–10%

Search Spending Growth Picks Up on Rising CPCsTotal spending on paid search ads grew 22% Y/Y in Q3 2017, up from 20% growth a quarter earlier. CPC growth accelerated for the fifth straight quarter, rising to 4% in Q3 2017. Mobile ad inventory expansion had depressed CPC growth in late 2015 and early 2016, but CPCs have been rebounding in recent quarters. Bing and Yahoo spending declines have also weighed down overall search spending growth, but combined spending across the two platforms grew Y/Y in Q3 2017 for the first time in two years.

Google Shopping Still Outpacing Text Ads in Spending GrowthAdvertiser spending on Google Shopping ads rose 37% Y/Y in Q3, while spending on Google text ads increased 15%. Although non-brand text ad spending growth remained near recent highs at 20% Y/Y in Q3, lackluster growth for brand keywords has dampened overall text ad gains for the past year. Q3 2017 marked a shift, though, where non-brand text ad spend growth was driven more by pricing than volume growth, a development that will only be sustainable if ad conversion performance also continues to improve.

Google Search Spend Growth Ticks Up a Point to 24%Spending on Google search ads rose 24% Y/Y, as clicks grew 19% and CPCs rose 4%. Google CPC growth has not been higher since mid-2015, when CPC inflation for advertisers’ brand keywords more than offset CPC declines for non-brand keywords and PLAs. In late 2017, advertisers are seeing the reverse, as brand keyword CPCs have fallen, but PLA and non-brand keyword CPCs are rising sharply.

30%

40%

20%

50%

ClicksAd Spend CPC

25%

Google Shopping (PLAs)

17%

22%

ClicksAd Spend CPC

4%

–10%

10%

30%

19%

4%

37%

15%

Google Spending Y/Y Growth by Ad Format

Overall US Paid Search Y/Y Growth

Google Overall US Paid Search Y/Y Growth

24%

Text AdsNon-Brand Text Ads

20%

Q1Q4Q3 Q3Q22016

Q22017

Q1

Q1Q4Q3 Q3Q22016

Q22017

Q1

Q1Q4Q3 Q3Q22016

Q22017

Q1


50%

100%

–50%

Stronger Desktop Results Continue to Help Fuel Google GrowthWhile search ad spending continues to grow much faster for mobile than other devices, desktop still accounts for the largest share of ad spend, so the relatively strong performance it has delivered in the past year has been a key driver of Google’s overall growth. In Q3 2016, Google gave advertisers back the ability to segment desktop and tablet search ad bids, which led most search programs to push the better converting desktop segment and pull back on the weaker performing tablet segment.

Google Brand Keyword CPC Declines Steepen, Spend Down 2% Y/YBrand keyword CPCs on Google, which had been roughly flat in Y/Y terms from Q2 2016 through Q1 2017, fell 13% Y/Y in Q3 2017 after falling 8% Y/Y a quarter earlier. The timing of the CPC decline coincided with a May 2017 Google change to Ad Rank and a subsequent decline in the minimum bids required for brand keywords to appear on the first page of results and at the top of the results page. Brand keyword spend fell 2% Y/Y even as clicks rose 12%.

Non-Brand Google Search Spend Growth Resilient, but CPCs RisingSpending on non-brand Google search ads grew 28% Y/Y in Q3 2017, but click growth continued to slow from the heights it achieved in early 2016, while CPCs continued to rebound. Google’s full launch of PLAs on image search in May 2016 had depressed Y/Y CPC growth through mid-2017, as image search carries lower CPCs than Google’s core search property. A Google change to its Ad Rank calculation in May 2017 may also be contributing to the CPC rebound, while the decoupling of desktop and tablet bids has more clearly helped push up CPCs.

Google Brand US Paid Search Y/Y Growth

150%

45%

30%

Google Search Spending Growth by Device Type

Google Non-Brand US Paid Search Y/Y GrowthClicksAd Spend CPC

–23%

–15%

15%

4%

Phone Tablet Desktop

25%

51%

23%28%

30%

15%

ClicksAd Spend CPC

–15%

12%

–2%

–13%

Q1Q4Q3 Q3Q22016

Q22017

Q1

Q1Q4Q3 Q3Q22016

Q22017

Q1

Q1Q4Q3 Q3Q22016

Q22017

Q1


45%

30%

–15%

15%

JulJun SepAugApr

Google Minimum Bids for Key Text Ad Segments Continue to DivergeGoogle estimates for the minimum bids necessary to appear on the first page of results and the top of the results page continued to diverge for the brand and non-brand keyword segments in Q3. Brand first page minimums were 11% lower in September than they were at the start of April, while non-brand minimums have risen over 30%. While non-brand CPCs have recently risen and brand CPCs have fallen, the timing of those trends and the shift in minimum bids has correlated better for brand keywords.

UK Google Search Ad Spend Growth Dips to 13% Y/YAlthough UK Google search trends have been a bit more turbulent than those in the US recently, the general trending of click and CPC growth have been directionally similar. Google UK CPCs rose slightly in Q3 2017, up from a 4% Y/Y decline a quarter earlier and larger declines in early 2016. UK click growth has slowed since early 2016 highs and stood at 13% in Q3 2017. All told, UK spend growth slowed slightly to 13% in Q3, from 14% in Q2.

Top-Position Google Search Ads Generating Larger Share of ClicksText ads appearing in position one at the top of the page have generated 35% non-brand keyword clicks since May, when Google made a change to its Ad Rank calculation. That is up from 32% earlier in 2017, and this mix shift to the very highest ads on the page, albeit small, likely explains some of the recent rise in average click costs. Most position-one gains have come at the expense of lower-priced ads at the bottom of Google’s results page.

UK Google Overall Paid Search Y/Y Growth

40%

20%

30%32%

32%

–3%

10%8%

19%

May

Google Text Ad Minimum Bid EstimatesChange Relative to April 1, 2017

Non-Brand Top of PageNon-Brand First Page

–11%

31%

12%

Position 2Position 4

Position 1Position 3MarJun Dec DecSep

2017Jun Mar SepSep

2016Jun

40%

30%

–10%

10%

20%

ClicksAd Spend CPC

Brand Top of PageBrand First Page

Q1Q4Q3 Q3Q22016

Q22017

Q1

13%

0%

Share of Non-Brand Google Desktop Search Ad Clicks by Top-of-Page Position


60%

80%

Google Shopping Continues to Play Growing Role for US RetailersGoogle Shopping and the PLA format generated 53% of retailers’ Google paid search clicks in Q3 2017, in line with Q2 2017, but up five points from a year earlier. For the non-brand segment, PLAs produced 77% of Google search ad clicks for retailers in Q3 2017, up two points from a quarter earlier and nearly five points from Q3 2016.

Shopping is 57% of UK Google Search Ad Traffic for RetailersAs Google attempts to satisfy the European Commission’s antitrust concerns by allowing comparison shopping sites to participate in Google Shopping auctions, Merkle finds that PLAs are generating 57% of retailers’ Google search ad clicks in the UK market. Google’s changes will only bring more competition to the Shopping auction, but it remains to be seen how well comparison shopping sites are able to compete versus the retailers and other ecommerce sites already taking part in the auction.

Google PLA Growth Strongest on Mobile, but Desktop Not Far BehindSpending for PLAs on phones grew 55% Y/Y in Q3 2017, while desktop PLA spending grew an impressive 42%. Phone growth has slowed sharply since late 2015 and early 2016, a period of significant mobile PLA inventory expansion. As with text ads, desktop PLA growth has benefited from Google allowing advertisers to segment desktop and tablet bids beginning in Q3 2016.

200%

100%

Google PLA Spending Growth by Device Type

150%

PLA Share of Google Paid Search ClicksAggregate Results - US Retail

50% 55%42%

Q3Q2Q1 Q42015 2016

OverallNon-Brand

Q3Q3Q2Q1 Q4Q3Q2Q1 Q420172014

Q1

77%

53%

Q2

40%

20%

–50%

Phone TabletDesktop

Q1Q4Q3 Q3Q22016

Q22017

Q1–12%

80%

40%

Q1Q4Q3 Q3Q22016

Q22017

Q1

PLA Share of Google Paid Search ClicksAggregate Results - UK Retail

57%


80%76%74%

66%73%71%

30%

60%

90%

Health & Beauty

Apparel Flowers & Gifts

ConsumerElectronics

Home & Garden

SportingGoods

Cars &Auto

Most Product Categories See Large Click Share Gains for PLAsAcross seven major product categories, all but apparel have seen double-digit increases in the share of Google search ad clicks produced by PLAs since the beginning of 2016. Although the apparel category has seen roughly average growth in PLA volume, it has seen unusually strong growth in text ad volume for the typical search program in the last year, resulting in a small decline in PLA click share.

PLAs Outperform Text Ads, but Gap Has NarrowedAlthough PLAs generated a 12% lower average order value (AOV) on desktop than text ads in Q3 2017, their 25% higher conversion rates led to a 13% higher revenue per click. This difference in revenue per click has decreased in recent quarters, however, as text ad conversion rates have improved.

Amazon Participation in PLAs Still Limited as Holiday Shopping Season LoomsAlthough Amazon’s impression share for home goods PLA auctions is running nearly twice as high as it was in early 2017, it still does not appear that Amazon has branched out its PLA program into other product categories in any major way. Historically, Amazon has been particularly aggressive with its Google text ad program in Q4, and it made its initial foray into the PLA auction last December. So it will be interesting to see if Amazon finally makes a bigger push into PLAs in the coming weeks.

Google PLAs vs. Non-Brand Text AdsDesktop

50%

30%

Google Shopping Impression ShareHome Goods Category

10%

40%

+13%

PLA Share of Non-Brand Google Paid Search ClicksMedian Site Results - US Retail

Jun 19May 22Jan 30 Apr 24Mar 27Feb 27Jan 2week of

20%

42%38%

–15%

Q4Q1 Q3Q22016 2017

Q2Q1

+60%

Non-Brand Text Ads

+15%

+30%

+45%

Q3

AOVConversion Rate Revenue Per Click

AmazonMerkle Average

+25%

–12%

Metrics:

54%

Q1-2017 Q3-2017Q2-2017Q1-2016

Q2-2016Q3-2016

Q4-2016

Sep 11Jul 17 Aug 14


AugApr Jun

4%

Google Maps Share of Brand Clicks Dips on Phones, Hits New Desktop HighThe Get Location Details click type, which occurs on Google Maps ad listings, but is drawn from an advertiser’s core keyword-based AdWords program, generated 6% of brand keyword clicks on phones in September for brick-and-mortar advertisers. That was down slightly from a peak in July, but the longer historical trend suggests that Google Maps clicks are likely to trend higher over time. Maps accounted for over 1% of desktop brand keyword clicks in September, a new high.

Newer Google Mobile Text Ad Slots Seeing Declining Share of ClicksAdditional top-of-page mobile text ad slots, introduced by Google in mid-2015 and mid-2016, have been widely credited for helping Google performance rebound from relatively weak growth in early 2015. While the expansion of mobile PLA inventory over a similar time frame may have had an even greater impact, these text units have generated as much as 7% of phone text ad clicks. Those numbers have recently been on the decline, though, as a larger share of clicks is being produced by top-position ads in recent months.

Non-Brand Click Share Spikes for Ads Tied to Google MapsGet Location Details clicks from Google Maps accounted for over 3% of all Google non-brand search ad clicks for brick-and-mortar advertisers in September 2017. That rate has doubled since April 2017, and it has more than quadrupled since the beginning of the year. Get Location Details also accounted for 1.4% of desktop non-brand search ad clicks in September, a surprisingly higher rate than its share of desktop brand search ad clicks.

6%

Get Location Details Share of Brand Text Ad TrafficBrick-and-Mortar Advertisers

Get Location Details Share of Non-Brand Text Ad TrafficBrick-and-Mortar Advertisers

2%

8% Phone Desktop

AugJan JunMayFeb Mar Dec2016

Apr Oct2017JanNovSep MayJul Feb

6%

1%

6%

SepJulMar

3.5%

0.9%

Position 3Position 4

MarJun Dec DecSep Jun Mar SepSep2016 2017

Share of Google Phone Text Ad ClicksTop-of-Page Ads

AugApr Jun

4% Phone Desktop

AugJan JunMayFeb Mar Dec2016

Apr Oct2017JanNovSep MayJul Feb

3%

1.4%

SepJulMar

1%

2%

2%

4%

3.1%

Jun


The Role of Audiences in Google Search Grows

Advertisers are increasingly able to target individuals based on CRM data and past user behavior in Google search, using Customer Match (CM), remarketing lists for search ads (RLSA), and similar audiences built by Google based on CM and RLSA lists. As both targeting capabilities and advertiser adoption of those capabilities have grown, so too has the share of clicks attributed to audiences across all three device types.

This click share does not include the share of traffic that can be attributed to other targeting options that might conceivably be considered audiences by some, such as Google age and gender targets. Instead, it represents only CM, RLSA, and similar audiences based on CM and RLSA.

Google has steadily made updates to help grow the importance of audiences for advertisers, and one major update helping the Q3 year-ago comparisons was the September 2016 expansion of the maximum RLSA membership duration window from 180 days to 540 days. This allows advertisers to use larger audience lists in general, as well as to target seasonal buyers annually.

These audiences make up an even larger share of orders and sales, as they convert at higher rates than non-audience members and also spend more per order on average.

Click-through rate is also a lot higher for audiences than non-audience members. This is both because users who are familiar with a brand are more likely to click on an ad they recognize, as well as the fact that advertisers typically bid more aggressively for these audiences, given their relatively high conversion rate and average order value (AOV).

In all these measures, audiences outperform non-audiences more significantly for non-brand text and Google Shopping (the vast majority of which is non-brand) than for brand text ads. This is because the difference between having a demonstrated brand affinity and not is larger when a user is searching for a non-brand query, compared to when they’re typing in an advertiser’s brand name.

For the most part, brands focus on being more aggressive with bids and optimizing audiences on the non-brand side, since these efforts are more likely to produce incremental gains. Particularly in terms of bidding, there’s often little to be gained by bidding more aggressively for audiences on brand keywords since most advertisers are already in position one for those searches.

Share of Google Search Clicks from Customer Match, RLSA, and Similar Audiences

Desktop Phone Tablet

14%

22%

11%

20%

13%

20%

20172016

Google Search Audience vs. Non-Audience Performance

CTR Conversion Rate AOV

Non-Brand Text Ads Brand Text Ads Shopping

+212%

+39%

+71%

+13% +7%

+57%+77%

+28% +35%

Non-Audience Baseline


FinancialServices

B2B TravelInsurance Retail & Consumer

Goods

Health & Pharma

Retail Google Search Spend Growth Remains Strong, Travel Slips

With the exception of B2B advertisers, phone share of Google search ad clicks varies no more than four points from one major industry to the next. Phone spend share, however, varies as much as 16 points by the same comparison. Industries that are more direct response or ecommerce-focused like retail and travel exhibit lower than average mobile spend share, while more lead or awareness-focused industries tend to have higher mobile spend share.

Mobile Spend Share More Variable Across Industries than Traffic Share

Google Phone & Tablet Click Share by IndustryQ3 2017

FinancialServicesB2B TravelInsurance

Retail & Consumer

GoodsHealth & Pharma

Across six major industries, Google search spend growth accelerated across insurance and financial services, held steady for health and retail, and decelerated for B2B and travel. Retail remained a consistently strong performer, with Google spend up 24% Y/Y, but travel spend growth slipped from 23% Y/Y in Q2 2017 to 3% in Q3 2017. Major weather events and weaker international travel both likely impacted travel ad investment.

All Industries See Phones Produce Increasing Share of ClicksCompared to Q2 2017, all six major industries surveyed for this report saw phones produce a larger share of Google search ad clicks in Q3 2017. This comes despite the relatively strong recent performance of the desktop segment, primarily at the expense of tablet traffic, which advertisers have been bidding down since late 2016 when Google began allowing the segmentation of desktop and tablet bids.

ClicksAd Spend CPCMetrics:

36%

11%

–4%

29%25%

29%

24%

3%

41%

36%39%

10%

18%

–11%

5%

–5%

FinancialServices

B2B TravelInsurance Retail & Consumer

Goods

Health & Pharma

Google Phone & Tablet Spend Share by IndustryQ3 2017

Phone TabletMetrics:

Phone TabletMetrics:

Google Overall Paid Search Growth by Industry Q3 2017

26%

4%7% 8% 9% 10%

5%

57%57%57%55%54%

4%7%

5%10% 10%

7%

19%

41%

36%

52%

45%

52%

–7% –6%


40%

10%

Q3Q2Q1 Q42015 2016

20%

30%

Q3Q3Q2Q1 Q4Q3Q2Q1 Q4Q420172014

OverallNon-Brand37%

–20%

Bing and Yahoo Combined Search Spend Grows for First Time in Two YearsCombined search ad spending across the Bing Ads and Yahoo Gemini platforms grew 6% Y/Y in Q3 2017, the first positive quarter of growth since Q3 2015. Bing and Yahoo click growth has struggled as more traffic has moved to mobile, where Google has a more commanding share of traffic. But clicks grew 1% in Q3 2017, due to the improving growth rate of Bing Product Ads.

Bing Product Ad Click Share Rises to 21%The share of Bing search ad clicks produced by Product Ads increased to 21% among retailers in Q3 2017. This marked the fifth straight quarterly increase in share for Product Ads following two quarters of declines in mid-2016. Product Ads still generate a relatively small share of Bing search clicks, compared to the 53% click share that PLAs produce for Google. PLAs produced over 22% of Google search ad clicks in late 2013.

Bing Product Ad Spend Growth Jumps to 27% Y/YBing Product Ad spending increased 27% Y/Y in Q3, up from 11% in Q2. After growing by triple digits through most of 2015, Product Ad spend growth began to struggle in early 2016 after Yahoo began moving from Bing’s format to Google’s PLAs. Facing weaker year-ago comps, Y/Y Product Ad click growth has recently improved. Bing and Yahoo text ad spending growth has also rebounded, hitting 3% in Q3 2017, the first positive Y/Y growth number since 2015.

Bing Product Ad Share of Bing Ads Paid Search ClicksAggregate Results - US Retail

10%

30%

Bing Ads & Yahoo Gemini Overall US Paid SearchY/Y Growth

Bing Ads & Yahoo Gemini Spending Growthby Ad Format

ClicksAd Spend CPC

–30%

15%

–10%

1%

5%6%

Bing Product Ads Text Ads

3%

27%

Q1

21%

Q1Q4Q3 Q3Q22016

Q22017

Q1

Q1Q4Q3 Q3Q22016

Q22017

Q1

Q2

–15%


Phones and Tablets Combine for 59% of Paid Search ClicksPhones produced 49% of paid search clicks in Q3 2017, up a point from a quarter earlier and over four points from a year ago. Tablet traffic share held steady at 10%, which is down sharply from an all-time high of over 18% in Q1 2015. Desktop traffic share is down just a little over 1% in the last year, after falling by 14 points between Q3 2015 and Q3 2016 as Google ramped up mobile ad inventory.

Desktop Search Ad CPC Growth Spikes to over 16%Desktop search ad CPCs jumped 16% Y/Y in Q3 2017, up from a 9% increase a quarter earlier. Advertisers running Google PLAs saw an especially large increase in desktop CPCs, in large part due the impact of passing the anniversary of the launch of PLAs on image search in May. Image search PLAs are more prevalent on desktop, carry lower than average CPCs, and had been depressing Y/Y desktop CPC growth.

Mobile Search Spend Share Slips as Desktop CPCs JumpAcross search ad platforms, desktop spend share increased by two points from Q2 2017 to Q3 2017, despite mobile gaining in click share. Desktop CPCs grew faster than phone CPCs, while tablet CPCs continued their decline. Bing and Yahoo’s search platforms particularly weigh down overall paid search phone spend share, as phones only account for about 9% their spend.

Year-Over-Year Growth by Device Class

Phone and Tablet Share of Paid Search Clicks

Phone and Tablet Share of Paid Search Ad Spend

20%

40%

60%

Phone Tablet Combined

59%

49%

10%

15%

30%

45%

Phone Tablet Combined

–12%

16%

Ad Spend Clicks CPC–22%

37%PhoneTablet

Desktop

10%

50%

6%

–11%

22%

Q3Q2Q1 Q42014 2015

Q3Q3Q2Q1 Q4Q1Q3Q4 Q320172013

Q2Q4Q2 Q4Q12016

Q1 Q2

Q3Q2Q1 Q42014 2015

Q3Q3Q2Q1 Q4Q1Q3Q4 Q320172013

Q2Q4Q2 Q4Q12016

Q1 Q2

10%

27%

36%


–60%

Tablet Search Ad CPCs Continue to Decline Compared to DesktopFor non-brand paid search ads, tablet CPCs continued to fall compared to desktop, coming in 25% lower in Q3 2017. Tablet CPCs had been at rough parity with desktop prior to Google’s move to allow advertisers to segment tablet from desktop bids. Phone CPCs have held up better compared to desktop, as advertisers have pushed desktop bids, but they still come in significantly lower.

Phones Gain Google Click Share, Steady on Bing and YahooPhones produced 54% of Google paid search clicks in Q3 2017, up from 52% in Q2. Phones accounted for 21% of search ad clicks through Yahoo Gemini and 12% of clicks on Bing Ads, roughly in line with a quarter earlier. Bing lost one advantage it had in the mobile space in late September, when it was revealed that Google would replace it as the default search provider for certain Apple search functions like Siri. This may weaken Bing’s phone click share numbers moving forward; however, the impact to Google’s numbers will likely be small.

Desktop Search Traffic Continues to Far Outperform Other DevicesIn terms of the online revenue per click generated by each device type, desktops continue to outperform phones and tablets by a wide margin. For non-brand paid search, phone revenue per click was 66% lower than desktop in Q3, while tablet revenue per click was 35% lower. With advertisers accounting for other types of ad value, like cross-device and offline conversions, awareness, and branding, the CPC gap between mobile and desktop remains smaller than that for revenue per click.

Device Click Share by Search Ad Platform

Non-Brand Mobile CPC vs. DesktopMedian Site Results

Desktop CPC

PhoneTablet

–25%

–57%

Non-Brand Revenue Per Click vs. DesktopMedian Site Results

–75%

–50%

–25%

Desktop RPC

–66%

–35%

Desktop Phone Tablet

Yahoo Gemini Bing AdsGoogle

37%

69%77%

54%

21%12% 10% 10% 11%

PhoneTablet

–40%

–20%

Q1Q4Q3 Q3Q22016

Q22017

Q1

Q1Q4Q3 Q3Q22016

Q22017

Q1


Google’s Dominant Share of Phone Search Ad Clicks Steady at 97%Google’s share of US phone search ad clicks held steady at an impressive 97% in Q3 2017. While there’s little room for Google to increase that number, Google becoming the default search provider for Apple’s Siri and search within iOS in September may provide a small benefit. Google’s share of clicks on other devices dipped slightly from Q2 to Q3 as Bing and Yahoo had relatively strong Q/Q growth.

iOS Click Share Increases as Apple Launches Intelligent Tracking PreventionApple’s iOS and desktop Safari produced a combined 43% of all paid search clicks in Q3 2017, in line with Q2 2017 results, but up two points from a year earlier. The importance of Apple to ad traffic has received more attention with Apple’s launch of Intelligent Tracking Prevention (ITP) in iOS 11 and Safari 11 in September. Though ITP is likely to have a greater impact on other channels, it is important for search advertisers to ensure they are able to maintain tracking as more users adopt these Apple products.

Android Gains Back Some Ground in Mobile Traffic RaceAfter five straight quarters of increases, iOS share of mobile paid search clicks slipped a point from Q2 to Q3 2017, to Android’s benefit. Still, iOS accounted for 64% of mobile clicks, up from 62% a year earlier. Google’s Android operating system generated 35% of clicks on phones and tablets in Q3 2017, while more niche platforms only accounted for 1% of clicks.

US Paid Search Click Share by Browser/OS

100%

Google Share of US Paid Search Clicks by Device

Share of Phone and Tablet Paid Search Clicks by OS

Phone TabletDesktop Overall

90%

80%

20%

Q3Q2Q1 Q42014 2015

Q3Q3Q2Q1 Q4Q1Q3 Q320172013

Q2Q4Q2 Q4Q12016

AndroidiOS Other

40%

60%64%

35%

1%Q1

40%

iOS ChromeDesktop

Android FirefoxSafariDesktop

OtherEdge/IE

10%

20%

4%

30%

5%

22% 20%

38%

10%

0.3%

75%

95%

80%

85%

78%

97%

Q1Q4Q3 Q3Q22016

Q22017

Q1

88%87%

Q1-2017 Q3-2017Q2-2017Q1-2016

Q2-2016Q3-2016

Q4-2016

Q2

ORGANIC SEARCH& SOCIAL

MERKLE DIGITAL MARKETING REPORT Q3 2017 18SEO & SOCIAL CSEDISPLAY & PAID SOCIALEXEC SUMMARY PAID SEARCH


–3%

Organic Search Visits Fall 3% As Growth Weakens Across DevicesSite visits produced by organic search fell 3% Y/Y overall in Q3 2017, down from 1% growth a quarter earlier. Growth rates were weaker across all device types with phone visit growth slowing from 15% Y/Y in Q2 to 9% in Q3. Tablet organic search visits fell 11% Y/Y in Q3, while desktop visits fell 10%. Organic search visits continue to face pressure from paid search ad clicks, which grew 17% in the quarter.

Google Share of US Organic Search Visits Rises to 91%Google accounted for 91% of US site visits produced by mobile search in Q3 2017, up from 89% a quarter earlier and 88% in Q3 2016. Google’s share of mobile organic search visits rose to just under 95% in Q3 2017, up from 92% a year earlier. Over the last year, Yahoo has seen slightly larger overall organic search visit share losses than Bing, but larger share losses on mobile. While Bing generated 5% of all organic search visits in Q3, it produced just 2% of mobile organic search visits.

Google Organic Search Visits Up Marginally, Bing Sees Large DeclineWhile Google organic search visit growth slowed from 5% in Q2 2017 to under 1% in Q3, Bing and Yahoo traffic declines remained a larger drag on total organic search growth. Bing organic search visit growth took a particularly negative turn in Q3 2017, falling 16% Y/Y. This downturn coincided with strengthening Bing search ad click growth, particularly for the Product Ad format. Still, the larger hurdle for Bing and Yahoo organic search visit growth remains the shift to mobile, where Google holds a particularly strong position.

US Organic Search Visit Share by Engine

Y/Y Growth in Organic Search Visits by Engine

–15%

15%

–30%

30%

Phone Tablet Desktop Overall

–11%

9%

–10%

Y/Y Growth in Organic Search Visits by DeviceMedian Site

–15%

15%

–30%

30%

Google Yahoo Bing

1%

–20%

–16%

2017-Q32016-Q3

Google

88%91%

Google

92% 95%

Yahoo

5% 4%

Yahoo

5% 3%

Bing

6% 5%

Bing

2% 2%

Overall Mobile

Q1-2017 Q3-2017Q2-2017Q1-2016

Q2-2016Q3-2016

Q4-2016

Q1-2017 Q3-2017Q2-2017Q1-2016

Q2-2016Q3-2016

Q4-2016


Organic Search Share of Site Visits Falls to 26%Organic search produced 26% of all site visits in Q3 2017, down a point from a quarter earlier and two points from a year earlier. Interestingly, direct site visit traffic share has trended very similarly to organic search visit share, giving credence to the notion that direct visits include a good portion of “dark search,” or misattributed organic visits. At the same time, as direct visits have lost traffic share, it suggests that the problem of dark search has not been getting significantly worse.

Phones Drive Mobile Share of Organic Search Visits to 54%Phones produced 44% of organic search visits in Q3 2017, while tablets produced 10%. Tablet share of organic search visits has fallen a little less than two points since Q1 2016, half the decline seen for paid search, where advertisers have been pulling back on tablet bids. Over the same period, phone share of organic search has risen four points, compared to 10 for paid search.

Search Monetization, Social Put Pressure on Organic Share of Mobile Site VisitsOn mobile devices, including both phones and tablets, organic search produced 24% of site visits in Q3 2017. Before Google significantly ramped up the monetization of mobile search in late 2015, organic search had generated a disproportionately high share of mobile site visits. Organic search and other channels also face more competition from social media on mobile devices.

Mobile Share of US Organic Search Visits

Organic Search Share of All US Site Visits

Organic Search Share of Mobile US Site Visits

10%

20%

40% DirectOrganic Search

30%

10%

20%

40% DirectOrganic Search

17%

24%

30%

Total Organic Mobile SharePhonesTablets

53%

43%

10%

60%

30%

Q1Q4Q3 Q3Q22016

Q22017

Q1

Q1Q4Q3 Q3Q22016

Q22017

Q1

Q1Q4Q3 Q3Q22016

Q22017

Q1

19%

26%


Mobile Rises to 57% of Google Organic Search VisitsAfter faltering in late 2015, the share of Google organic search visits produced by mobile devices has risen more steadily since 2016, but after a small dip in Q2 2017, it jumped more than two points to 57% in Q3 2017. Trending for Bing and Yahoo has not fared so well, with mobile share remaining roughly flat for Yahoo over the past two years and falling several points for Bing.

Nearly Three of Every Four Social Media-Produced Site Visits Are MobileThe rate at which mobile has taken share of all site visits produced by social media has not slowed, even as mobile is approaching three out of every four social visits. In Q3 2017, mobile accounted for 74% of site visits produced by social media, up nearly four points from a quarter earlier and ten points from a year earlier.

Social Platforms Generating 4% of Mobile Site VisitsWith much of social media’s activity and impact occurring on the platforms themselves, it’s importance to modern marketers goes beyond site visits produced, but those are growing at a healthy rate as well. Social media platforms produced 3.4% of all site visits in Q3 2017, up half a point from a year earlier. Social’s share of mobile site visits is higher, at 4%, and it has risen a bit more quickly in the past year.

Mobile Share of Social Media Site Visits

Share of Each Engine’s Traffic from Mobile

Social Media Share of Site Visits

20%

40%

60%

48%

Yahoo BingGoogle

18%

57%

Share of All Visits Share of Mobile Visits

2.4%2.5%

2.7%

2.9%3.0%

3.3%3.1%

3.4%

4.0%

3.6%3.9%

3.3%3.3%

2.7%

75% 74%

50%

25%

Q1Q4Q3 Q3Q22016

Q22017

Q1

Q1Q4Q3 Q3Q22016

Q22017

Q1

Q1Q4Q3 Q3Q22016

Q22017

Q1

DISPLAY &PAID SOCIAL

MERKLE DIGITAL MARKETING REPORT Q3 2017 22DISPLAY & PAID SOCIAL CSECSESEO & SOCIALEXEC SUMMARY PAID SEARCH


News Feed Ads Dominate Facebook Spend ShareNews Feed ads accounted for 84% of Facebook spend in Q3, far outpacing the second-largest source of spend, the right-hand rail, which accounted for 6%. Instagram received 3% of Facebook spend, while other assorted formats combined to account for the remaining 6% of spend share. News Feed is more attractive to brands that are focused on direct response, while formats like Instant Articles are used mostly for branding campaigns.

Impressions Up 22% Y/Y for Median Facebook AdvertiserDespite Facebook’s caution on recent earnings calls that it would not be able to continue increasing ad load at the same rate as in the past, ad impressions increased 22% Y/Y for the median Facebook advertiser. Cost per thousand (CPM) increased modestly, while click and CPC growth each contributed to keeping Y/Y spend growth for the platform strong.

Facebook Ad Spend Growth Slows to 40% Y/YAdvertisers increased Facebook spend 40% Y/Y in Q3, a decline from the 56% growth observed in Q2. Overall, paid social spend across all platforms increased 29%, with Facebook driving the vast majority of that growth. While Facebook continues to dominate in terms of paid social spend share, platforms like LinkedIn and Pinterest are meaningful for the advertisers active on them.

Facebook Impression Volume & Pricing Q3 2017Median Advertiser

40%

20%

Y/Y Spend Growth Q3 2017Median Advertiser

10%

30%

39%

Facebook Spend Share by Ad Format Q3 2017

Paid Social Facebook

25%

15%

20%

CPM Impressions

5%

10%

29%

40%

7%

22%

News FeedRight-Hand RailInstagramOther

84%

6%3%

6%


Mobile Continues to Drive the Majority of Facebook SpendPhones and tablets combined to account for 70% of all Facebook spend, more than double that coming from desktop computers. This represents a much higher share than other channels, such as paid search and comparison shopping engines, and Facebook has even begun releasing mobile-specific ad units such as Messenger Ads.

CRM Targeting Becoming Increasingly Important for BrandsBrands are increasingly using customer information for smart targeting across traditional display, paid social, and video advertising. In Q3, campaigns targeted based on CRM data accounted for 14% of spend. Prospecting campaigns accounted for nearly half of all spend, with the remaining 37% of spend share going to pixel-based remarketing efforts.

Facebook News Feed Ad CTR Much Higher than Right-Hand RailAds featured in the News Feed in the center of Facebook’s site and app had a CTR more than five times that of ads featured less prominently in the right-hand rail. The News Feed accounted for the vast majority of Facebook ad spend in Q3, but advertisers are continuing to grow the number of ad formats they use on Facebook.

Display, Paid Social, and Video Spend Shareby Strategy Q3 2017

0.50%

Facebook Ad Format CTR Q3 2017

0.25%

0.75%

39%

Facebook Spend Share by Device Q3 2017

News Feed Right-Hand Rail

Phone & TabletDesktop

70%

30%

1.00%

1.25%

1.50%1.50%

0.30%

CRMProspectingRemarketing

49%

37%

14%


Display Spend Up 72% as Advertisers Try More PlatformsBrands that use traditional display advertising increased spend 72% Y/Y, a stronger growth rate than paid social in Q3. While some of that increase in spend can be attributed to increased same-platform investment, brands are also expanding the number of platforms and placements they take advantage of, as the average brand was active on 19% more platforms Y/Y in Q3.

Mobile Accounts for Vast Majority of YouTube SpendPhones and tablets combined to account for 83% of all YouTube ad spend, significantly higher than the 46% share observed on the GDN. For many platforms, video content is consumed primarily on mobile devices, and other video advertising formats, such as Facebook video ads, see similarly high mobile spend share.

GDN Mobile Spend Share Grows Four Points Y/YPhones and tablets combined to account for 46% of all Google Display Network (GDN) spend in Q3, up from 42% for the same quarter last year. These devices account for a much greater share of click traffic, but, much like with Google search, the average CPC of mobile display ads is lower than desktop for most brands.

YouTube Spend Share by Device Type Q3 2017

50%

20%

Google Display Network Mobile Spend Share Phones & Tablets

10%

30%

39%

Traditional Display Advertising Growth Q3 2017

Q3 2016 Q3 2017

80%

40%

20%

60%

Display Spend Average Display Platforms per Advertiser

72%

19%

40% 42%

46%


83%

17%

CSE

MARKETPLACES& CSEs

MERKLE DIGITAL MARKETING REPORT Q3 2017 CSE 26DISPLAY & PAID SOCIALSEO & SOCIALEXEC SUMMARY PAID SEARCH


Amazon Ad Formats Grow Significantly Q/QAmazon Sponsored Products Ads spend grew 52% from Q2 2017 to Q3 2017, while spend for Headline Search Ads (HSAs) and Product Display Ads (PDAs)increased 63% and 112%, respectively. While Sponsored Products account for the vast majority of total Amazon ad spend, most advertisers studied are currently taking advantage of all three formats.

Sponsored Product Ads Tops Among Amazon Formats in Sales Per ClickSponsored Product Ads, which are keyword-targeted ads featured on both the right rail and in the middle of search results on Amazon, drive the highest sales per click for advertisers among Amazon formats. HSAs produced a 29% lower SPC than Sponsored Products, while PDAs produced less than half the SPC of Sponsored Products.

Most Amazon Ad Spend Attributed to Sponsored ProductsAmazon advertisers spent 82% of total Q3 investment on Sponsored Products, which are available for use by all Amazon advertisers. Only first-party sellers can use PDAs, and that was also the case for HSAs until a policy change in August. While HSAs and PDAs account for much less spend, Q/Q investment growth for these two formats outpaced that of Sponsored Products in Q3.

Normalized Amazon Ad Sales Per Click Q3 2017Median Advertiser

Q/Q Amazon Spend Growth Q3 2017

Amazon Spend Share by Format Q3 2017

90%

30%

60%

112%120%

Sponsored Product Ads Headline Search Ads Product Display Ads

63%

52%

Sponsored Product Ads

Product Display AdsHeadline Search Ads8%

82%

10%

75%

25%

50%

100%


–29%

–56%


Amazon Ad CTR Highest for Prominent Headline Search AdsHSAs featured at the top of Amazon search results have the highest CTR among Amazon formats. Interestingly, PDAs, which are featured below the buy box on product details pages, have roughly the same CTR as Sponsored Product Ads. There can be only one PDA featured on a product details page, compared to potentially multiple Sponsored Products per search results page.

eBay Commerce Network CPC Decline QuickensWhile ECN CPC has been declining Y/Y for all of 2017 so far, the pace quickened in Q3 with a 54% Y/Y decline compared to a decrease of 31% in Q2. With eBay’s decision to eliminate product ads from showing directly on ebay.com, the network lost some of its best performing traffic, resulting in ECN traffic producing lower value for advertisers and necessitating lower cost per click.

eBay Commerce Network Spend Share Continues to DeclineeBay accounted for 54% of all US CSE spend in Q3 2017, a significant decline from the 66% share that its network accounted for a year earlier. While eBay Commerce Network (ECN) share has been in steady decline since last Q4, Q3 saw the biggest quarter-to-quarter drop in spend share as product ads were removed from ebay.com entirely in May.

CSE CPC by Engine

Normalized Amazon Ad CTR Q3 2017Median Advertiser

CSE Spend Share by Engine

75¢

50¢

25¢

Connexity eBay Commerce Network Other

11¢15¢

26¢

12¢

56¢

65¢

500%

100%

300%


+414%

75%

25%

50%

Q2 Q3 Q3Q4 Q22016 2017

Q1

Connexity eBay Commerce Network Other

54%

1%

45%

Q3 2017Q3 2016

+10%

600%

400%

200%

35%

63%

2%2%2%6%

3%

38%

28% 27% 28%

68%70%66%

60%


CSE Mobile Share Up Q/Q, Still Relatively Low12% of all CSE traffic came from phones and tablets in Q3 2017, an improvement from just 6% in Q2. Mobile share of eBay Commerce Network traffic went up in Q3 with the removal of product ads from ebay.com, as the rest of the ECN seems to provide a stronger share of traffic from phones and tablets than the eBay domain did in the past.

Connexity Mobile Click Pricing Similar to DesktopIn contrast to a platform like Google Shopping, most CSEs don’t have bidding controls for advertisers to adjust the price paid for traffic from different device types, including Connexity. As such, different device types have fairly similar CPC, though tablet has trended about 10% higher than desktop for several months. Interestingly, Connexity mobile sales per click is actually higher than desktop for some brands.

ECN Still Dominant in Some Categories as Overall Spend Share ShrinksWhile spend share is relatively even between Connexity and the eBay Commerce Network for some product categories, such as apparel and accessories, and consumer electronics, the ECN still has a dominant position for other categories, including arts and entertainment. However, even in the case of arts and entertainment, ECN spend share slipped from 92% in Q2 2017 to 75% in Q3 with the sunset of product ads on ebay.com.

Connexity Mobile CPC Relative to Desktop

CSE Traffic Share by Device Type

CSE Spend Share by Product Category

TabletPhone


88%

12%

Connexity eBay Commerce Network80%

Apparel & Accessories

Home & Garden

Health & Beauty

Consumer Electronics

Arts & Entertainment

50% 50%55%

45% 46%

54%

28%

72%

40% 36%

64%

–15%

+15%

+30%

Desktop

+8%

Jan Feb Mar Apr May Jun Jul Aug Sep

CSEMERKLE DIGITAL MARKETING REPORT Q3 2017 30CSEDISPLAY & PAID SOCIALSEO & SOCIALEXEC SUMMARY PAID SEARCH

DMR METHODOLOGYFigures are derived from samples of Merkle clients who have worked with Merkle for each marketing channel. Where applicable, these samples are restricted to those clients who 1) have maintained active programs with Merkle for at least 19 months, 2) have not significantly changed their strategic objectives or product offerings, and 3) meet a minimum ad-spend threshold. All trended figures presented in this report represent same-site changes over the given time period. Unless otherwise specified, the data points in this report are derived from the North American market region.

Merkle is a leading data-driven, technology-enabled, global performance marketing agency that specializes in the delivery of unique, personalized customer experiences across platforms and devices. For more than 30 years, Fortune 1000 companies and leading nonprofit organizations have partnered with Merkle to maximize the value of their customer portfolios. The agency’s heritage in data, technology, and analytics forms the foundation for its unmatched skills in understanding consumer insights that drive people-based marketing strategies. Its combined strengths in performance media, customer experience, customer relationship management, loyalty, and enterprise marketing technology drive improved marketing results and competitive advantage. With 4,400 employees, Merkle is headquartered in Columbia, Maryland, with 16 additional offices in the US and 11 offices in Europe and Asia. In 2016, the agency joined the Dentsu Aegis Network. For more information, contact Merkle at 1-877-9-Merkle or visit www.merkleinc.com.

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Q3 1 7 Q320Q3 2017 - Amazon S3 · Spending on Bing Product Ads grew 27% Y/Y, its strongest growth...

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