Cross-Channel Marketing Report 2016: The State of Shopping Ads

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An image of a mobile phone with a shop front.

Over the past two years, shopping ads have become a very hot topic for search advertisers. Not only is Google Shopping a huge potential ad channel, there are also now Bing Shopping Ads and—expanding into social—Facebook Marketplace. Retailers everywhere have seen the importance of these platforms and have incorporated them into their campaigns.

For this report, we took a look specifically at search shopping campaigns, namely Google and Bing as well as the performance of retailer social advertising. We examined the performance of Bing and Google Shopping Ads between 2014 and 2015 as well as Facebook Shopping ads since 2015, to understand this ad format and key performance indicators across two years. We also provide seasonality trends and forecasts to provide guidance for retailers for the remainder of 2016.

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To create this report, we sampled the Marin Global Online Advertising Index, analyzing a representative set of enterprise retailers spending over $100,000 per month on Google and Bing text ads and Product Listing Ads (PLAs), now called Shopping Ads. As such, our data and findings skew toward the performance of larger retailers, and may not reflect performance trends for small retailers. However, the size and diversity of our dataset enables us to provide the most comprehensive analysis on shopping ad performance.

Where appropriate, all monthly key performance indicators were normalized to January 2015— instead of exposing absolute values—to more clearly highlight overall trends. A longitudinal analysis was applied for year-over-year performance. For this report, we refreshed our client index data pool. This could result in slight deviations from previously reported data, but makes for more representative analysis and findings. The addition of Bing product ad data may also create some deviations from prior-year data (2014 and 2015).

Findings and Trends

Text v Product Ads

Retailer spend behavior was consistent over the last two years, with sharp peaks in spend during Q4. Surprisingly, November beat December in both 2014 and 2015 for shopping ad spend, with an average of 85% more spend during November than during the beginning of the year, versus 50% during December. While traditional search spend is usually relatively flat in Q1 to Q3, we’ve been seeing a steady overall increase in shopping ad spend over the past two years, with growth accelerating in the last half of 2015 and early 2016, partially due to inclusion of Bing Shopping Campaigns.

Shopping ads have not only been growing in advertiser budget spend—they’ve also been making up a larger part of overall retailer budgets for search. Over the past two years, shopping ad spend share grew from 18% to 28%. Similar to raw spend, there are typically peaks for shopping ad spend share during the holiday seasons. Every November and December, shopping ad spend share jumps about 15% compared to the average of Q1-Q3, before dropping back along the former trend line in January. Similarly, there was similar growth in click share, with almost one third of all search clicks being on a shopping ad this Q4.

Interestingly, while shopping ads continued to attract more user attention and take up more and advertising budgets, CPC remained quite stable year-over-year. Text ads actually had more drastic ups and downs over the past two years than shopping ads, which have a very cyclical annual CPC cycle. While CPCs for shopping ads were close to text ads in 2014, in 2015, the CPC for text ads pulled away until the shopping season, when it re-converged, as shopping ads became more important for retailers.

When we looked at shopping versus text ad click-through-rates (CTRs), we saw a slow, gradual decline over the past two years. CTR between the two ad types is virtually the same.

Mobile Shopping

A big change in shopping is the rise of mobile. The lines between online and offline shopping have blurred more than ever, with consumers using mobile devices for product and comparison shopping, online and offline. While the differences between tablet and desktop behavior are negligible, the difference between desktop and smartphone is now more significant. This growing divide between these two groups is representative of the way these devices are used. Tablets and desktops are interchangeable, used at home for online shopping and browsing, while smartphones are on-the-go devices.

There was massive smartphone growth within the past year. Smartphone clicks more than doubled year over year, while growth for desktops and tablets remained stagnant. Smartphone click growth peaked in late 2015, with clicks growing almost 150% above the baseline compared to January of the same year, versus 25% for desktops and tablets.

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There were similar trends for retailers’ spend by device. Smartphone shopping ad spend is growing rapidly, with sharp peaks during the holiday season. It pulled away steeply in 2015 and the trend continues in 2016 so far. In November 2015, smartphone spend reached almost 400% above baseline of what it was in the beginning of the year, versus 150% and 130% for desktop and tablet, respectively.

This all shows the importance of smartphones for retailers today, with shoppers on their phones and on the go, rather than being mostly the desktop-bound shoppers of before. With the rapid growth of smartphone clicks, it is no surprise that almost half of all retail clicks and almost 55% of shopping ad clicks are now on a smartphone.

The importance of smartphones for retailers cannot be overstated—roughly a third of both shopping ad and overall search dollars that retailers spend are on smartphones. While there’s some disparity between smartphone click share and spend share, it’s continually tightening and ever-increasing, meaning that advertisers need to shift budget accordingly.

After the holiday season, shopping ad CTR returned to normalcy. Desktop clickthrough rates declined slowly, while smartphone and tablet remained relatively flat, with smartphone consistently higher than desktop or tablet.

CPCs have risen for shopping ads on tablets and desktops, becoming competitive with text ad CPCs. However, shopping ad CPCs for smartphones remain almost 25% lower than text ad CPCs on smartphones. The gap between smartphones and the other two devices continues to widen compared to a year ago.

Social Shopping

When we look at how retailers have been advertising on social media, it makes sense that the majority of advertiser budget and attention is on smartphones and tablets. What is surprising is just how mobile-focused it is. For retailers on social networks, we saw almost 95% of all clicks and 90% of spend on mobile in Q1 2016. Across all verticals, we usually see mobile clicks and spend reach around 75-80% share, but it is particularly high for retail.

What we see is that mobile devices are especially important for retailers across all channels. The close ties between social and mobile have shown to prove resilient and to even grow over time. While there isn’t much room for social activity to grow on smartphones and tablets, it does still appear to be slowly trending upwards.

CTR for social network ads on mobile devices remained consistent after the holiday season, although there was a slow decline for desktops. Typically, desktop remains the device of choice for conversion-style ads, which may explain this behavior. CPMs also dropped slightly across both desktop and mobile post-holiday season closer to the overall trend line. Mobile CPMs remain lower than desktop CPMs, largely due to differing creative types for mobile and desktop.

What’s Next

Last year, we forecast that 30% of all retail paid-search spend would be on a shopping ad, and 45% of all product ad clicks would be on a smartphone. We actually underestimated how strong smartphone click growth would be. Looking forward, where do we see shopping ads this holiday season?

We took a look at month over month variations and factored in seasonal shifts in performance to forecast where we’ll be by December 2016:

  • 40% of all shopping ad dollars will be on a smartphone
  • 37% of paid search clicks will be on a shopping ad

Social clicks and spend share should flatten out over the year and remain at current levels

For the remainder of the year, retailers will continue to develop and invest in shopping ads and mobile. As consumers have become accustomed to shopping campaigns, shopping ad clicks and spend share have stabilized at roughly 35-40% share. This ad type will continue to be useful for retailers, particularly around back to school and the holiday shopping season.

Smartphone investment continues to grow, but is slowing and stabilizing. By end of year, we predict that smartphone clicks and spend share will stabilize at around 40%. For retailers looking to stay on top of their game, investment on mobile devices, as well as desktops and tablets, will be crucial during the holiday season. With improvements to the shopping ad format, retailers will need to ensure efficient management of their shopping campaigns to get the most out of their bids during crucial periods.

By December 2016:

  • 37% Paid Search Clicks will be on a shopping ad
  • 40% Shopping Ad Dollars will be on a smartphone

Key Takeaways

  • Evaluate strengths and weaknesses of different ad formats: Different ad formats, across channels and devices, affect user behavior in different ways. While social ads may be better for brand outreach, search ads are better for conversions. Understanding which ad types perform best on one device versus another is key to optimizing advertiser budgets.
  • Mind the mobile-desktop gap as it continues to grow: Across all channels, smartphones divert retailer dollars and user attention from desktops and tablets. All signs point to this trend continuing. Retailers should pay careful attention to this trend to make sure budgets are allocated appropriately across devices.
  • Prepare for the holiday rush: With every year, the holiday season becomes larger and larger in terms of online shopping and advertiser competition. Based on 2014 and 2015 behaviors, we expect larger jumps in advertiser spend across all channels in subsequent Q4s. For retailers with a heavy holiday-season presence, be sure to budget accordingly and account for this increased competition in the last quarter of the year.

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