Q Digital Marketing Report. Follow us on

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1 Q Digital Marketing Report Follow us on

2 Contents 2 Executive Summary... 3 Detailed Findings U.S. Paid Search: Spend Trends...4 U.S. Search: Mobile Device Trends...6 U.S. Search: Paid Search by Industry Highlights...8 Looking Forward: Google Paid Search...9 U.S. Display: Programmatic Mobile Display...14 Europe Spotlight: Website Visitor and Interaction Trends Methodology About IgnitionOne... 19

3 Executive Summary 3 Search spend continues down trend for second quarter U.S. Google paid search, for the second quarter in a row and only the second time since 2009, decreased year over year (YoY). Q saw a slight decrease of 1% in spend. Mobile search increases despite overall search spend trends As budgets again shifted away from desktop and tablets to less expensive mobile ads, we see top-level spend decrease but smartphone spend grow. US mobile phone search spend increased 55% YoY while CPCs decreased 8%. Programmatic Display growth is flat as Google elbows ahead U.S. programmatic display spend was relatively flat YoY with a growth of 1% in Q2. The quarter also saw Google taking the lead in terms growth, up 35% YoY while spend in Facebook increased 22% YoY. European Website and Score trends Across a wide range of European clients, we saw a YoY decrease in website visitors in Q2 2016, down 21% YoY. However, while overall visitors have dropped, marketers are using solutions to drive improved results by communicating to the most qualified visitors with custom interactions increasing 99% YoY, driving leads up 41% overall. Additional breakdowns by key verticals (automotive, retail and travel) as well as mobile device usage are included in the report.

4 Detailed Findings 4 U.S. Paid Search: Spend Trends For the second quarter in a row, we are seeing a YoY decrease in Google paid search. Google search spend dropped in Q2 by 1% YoY, an improvement from the -5% YoY decrease in Q1. As in last quarter s report, the paid search numbers included in this report are based on IgnitionOne s US client activity on Google. YoY Search Spend Growth by Quarter YoY Change in Spend 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 18% 2Q15 18% 14% -1% 3Q15 4Q15 1Q16 2Q16-5%

5 5 While spend was essentially flat, there was, as with the previous quarter, an overall increase in search activity. Q2 continued last quarter s trends with increases in impressions and clicks up 13% and 10% respectively. As in the past, the increase in impressions and the clicks on those impressions are driven by the shift to mobile and the additional ad space Google created in mobile. This drove down overall CPCs 10% YoY because of the increase in supply. YoY Google YoY Metrics Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Impressions 12% -21% 7% 19% 13% Clicks 1% 5% 13% 15% 10% Spend 18% 14% 18% -5% -1% CTR 35% 36% -8% -4% -3% CPC 17% 9% 4% -17% -10% ecpm 58% 47% -4.5% -20% 12% Quarter-over quarter we saw drops in spend (-12%), clicks (-6%), CTR (-12%) and CPC (-6%) while impressions was the sole metric increasing over Q1 (up 6%).

6 6 U.S. Search: Mobile Device Trends Continuing the trends from Q1, mobile phone spend growth YoY has accelerated (up 55%) while CPCs decreased 8% YoY with an average cost per click still half of desktop CPCs. As we saw with the overall spend numbers, as budgets again shift to less expensive mobile ads from desktop and tablets, we see top-level spend decrease. Impressions and clicks were again both up for smartphones (46% and 69%). This indicates that while mobile adoption is continuing to increase, it isn t inherently leading to incremental budgets for paid search, but rather a shift of existing dollars away from desktops to their more efficient counterpart. Smartphones saw CTR increase 16%, while tablets dropped 23% YoY. CPCs dropped for smartphones (-8%) again, due to the increased supply. Tablets also saw a decrease in CPCs, down 4% YoY. Q YoY US Paid Search Metrics by Device 80% 69% 60% 40% 46% 29% 55% 20% 16% 0% -20% -1% -4% -23% -8% -4% -40% Impressions Clicks Spend CTR CPC Phone Tablet

7 7 The share in mobile device stayed steady, which were 64% of spend for smartphones, compared to 36% for tablets. Q Mobile Search Spend Share by Device 36% Tablet 64% Phone

8 8 U.S. Search: Paid Search by Industry Highlights Finance and travel for the second quarter in a row saw the biggest decreases in YoY paid search spend in Q2, down 7% and 12% respectively. Also in a repeat performance, education saw the biggest increase in spend, up 42% YoY. Except for education which saw increases of 14% YoY, CPCs were down across the board, with finance seeing the biggest drop, down 16%. Clicks were up for all verticals, with Education leading at 25%. Auto saw an outlying leap in CTR, which was up 83% while its impression dropped 35% YoY. It should be noted that individual verticals can be heavily influenced by our client base and large clients potentially skewing the vertical numbers when they make major changes. YoY Q US Paid Search Metrics Growth by Vertical 100% 83% 75% 50% 25% 0% -25% 25% -9% -4% 9% 25% 19% 13% 12% -1% 42% 11% 2% -12% -7% -10% 9% 29% 3% 14% -10% -6% -11% -16% -50% -35% Impressions Clicks Spend CTR CPC Retail Travel Automotive Education Finance

9 9 Looking Forward: Google Paid Search We ll be watching Google Expanded Text Ads closely throughout the rest of the year. At first blush, the benefits of Expanded Text Ads are easy to spot. Google anticipates an overall lift in CTR upwards of 20% due to both the ability to hyper-target audiences with more descriptive copy thanks to new character limits, as well as the increased SERP (search engine results page) real estate that will be taken up by the longer ads. We expect this lift to vary quite a bit depending on vertical, device type and brand versus non-brand. Marketers may also see potential for CTR to drop in some segments for ads below position one, given the dominance the top ad will have on the SERP. This is particularly important for mobile, where space is already very limited. Google has a number of other changes coming up in the next few quarters that we will be monitoring closely. Updates include the separation of tablet as a unique device, allowing marketers to set individual bid adjustments, as well as the expansion of device multipliers, giving advertisers the ability to adjust bid multipliers from -100% to +900% (where the previous range only reached +300%). Advertisers will also have the ability to change base multipliers from desktop to search. Future reports will cover the effects of these changes as we see them present in the market. The more prominent placement of Google Shopping Ads (PLAs) also continues to effect the industry, leading to a continuing increase in spend, clicks and impressions on mobile, although CPCs still haven t stabilized. As 2016 carries on, it will be important to keep track of how the industry is reacting and how numbers stabilize as these innovations become ingrained in marketers toolkits. While we can t yet see the long-term effects of Google s move to drop right rail advertising and the addition of advertising real estate on mobile in our data, it will be one of the most important shifts to keep an eye on this year. From Google s perspective, these changes benefit searchers by putting more focus on more up to date results paid ads that can be updated nearly instantaneously as opposed to organic results which take longer to impact rankings. For advertisers, this means greater pressure to be above the fold, which means higher CPCs. While some advertisers may find some value in the bottom of the page results, the CPC spread between positions 4 (for queries that display four ads above the organic listings) and 5 could be significant.

10 10 U.S. Display: Programmatic Based on data from a diverse set of US clients in Q2 2016, programmatic display spend growth is relatively flat compared to Q2 2015, up only 1%. Impressions over the same time period dropped 5%. Compared to Q1 2016, programmatic display spend and impressions are both down 7% while ecpm is flat. When looking at display tactics in Q1, the shift away from remarketing ads (targeting ads to users who have visited a site before) seems to stabilized. Remarketing ads came in at 40% of spend. This is a slight decrease compared to Q1, which saw remarketing ads take up 41% of spend with prospecting tactics rising to 60%. This is a deceleration of the trend from the last few quarters where advertisers have shifted budget to reach new prospective users rather than bringing back existing visitors. US Programmatic Display Tactic Breakdown - Q % 40% Prospecting (LAL, contextual, custom targeting, reach) Remarketing

11 11 When looking at verticals, we see that finance shows the biggest drop on overall YoY programmatic display spend down 11%. Auto was a bright spot again increasing YoY spend by 10%. Auto also had the only decrease in ecpm, decreasing by 9% while retail and Travel increased by 11% and retail by 8% YoY. Q YoY Change in Programmatic Display Metrics by Vertical 30% 20% 21% 10% 10% 11% 11% 8% 0% -10% -20% -15% -12% -18% -6% -3% -11% -9% -30% Impressions Spend ecpm Retail Auto Travel Finance

12 12 Trading places again this quarter, Google took the lead in YoY spend growth on programmatic display, up 35% YoY while spend in Facebook increased 22% YoY. Both Facebook and Google saw ecpm growth, up this quarter 8% and 16% YoY respectively. Impressions for both are up as well with Google increasing 16% and Facebook 12% YoY. Q YoY Change in Programmatic Display Metrics by Publisher 40% 30% 35% 20% 22% 10% 16% 12% 16% 8% 0% Impressions Spend ecpm Google Facebook

13 13 The breakdown of share of spend saw both Google gain share over Facebook since last quarter growing from 23% of spend to 28%. Facebook dropped to 13% of display spend from 14% last quarter. Q Share of Programmatic Display Spend by Publisher Facebook 13% Google 28% Other 59%

14 14 Mobile Display When looking at total client basis, IgnitionOne smartphone share of display spend reversed last quarter s trend and increased slightly to 85%, from 83%. Smartphones continue to dominate the mobile display market, as mobile marketing becomes more sophisticated and efficient. The ios operating system continued to lose ground to Android for the share of spend, down to 41% for the Apple operating system, in comparison to 49% last quarter. Q Mobile Display Share of Spend by Device Type 15% Tablet Phone 85% Q Mobile Display Share of Spend by OS 41% 59% ios Android

15 15 Europe Spotlight: Website Visitor and Interaction Trends Across a wide range of our European clients who take advantage of our Website Personalization and Scoring solutions, we are able to report on Q trends in visitor activity, personalized on-site interactions, lead generation and score change. Interactions take the form of customized overlays of forms, coupons/vouchers, chat boxes and other direct one-to-one communications with a user. The leads tracked here are leads occurring from these interactions. Overall Trends Our European clients saw a YoY decrease in website visitors in Q2 2016, down 21% compared to a year earlier. In an effort to convert these visitors to leads, personalized interactions were served. These interactions increased 99% YoY, driving leads up 41% overall. So while overall visitors may have dropped, marketers are using these solutions to drive improved results by communicating to the most qualified visitors. Q YoY EU Website Metrics Charge 100% 99% 80% 60% 40% 41% 20% 0% -20% -40% -21% Visitors Interactions Leads

16 16 Overall Device Breakdown In Q2, mobile visitors continued last quarter s upward trend and grew 17% while desktop visitors decreased 31%, driving the overall visitor loss. Desktop visitors in Q still dominate with 67% share of all visitors. Q European Share of Visitors by Device 33% Mobile 67% Desktop

17 17 Vertical Focus When breaking metrics down by three key verticals, automotive, travel and retail, we see some interesting differences. While travel had a 25% drop in visitors it also had the largest YoY increase in leads at 213%. Automotive, again the most mature users of the website personalization technology, saw increases in visitors and leads that were on parity both growing 12% YoY. Q YoY Website Metrics Change by Vertical 250% 200% 213% 150% 100% 50% 54% 49% 37% 36% 0% 12% 2% 12% -25% -25% Leads Interactions Visitors Retail Travel & Leisure Auto

18 18 IgnitionOne Score measures a visitor s level of interest and propensity to convert and can be used to understand user engagement. When looking at score changes in Q compared to Q2 2015, we see automotive marketers had the most influence on their visitors interest over time, with average score increasing 121% YoY. Travel and retail increased scores at a slower pace, coming in at 63% and 18% respectively. Q YoY IgnitionOne Score Change by Vertical 120% 121% 100% 80% 60% 63% 40% 20% 0% 18% Auto Travel & Leisure Retail Q Share of Visitors by Device for Key Verticals 100% 50% 38% 62% 52% 48% 39% 61% 25% 0% Auto Travel & Leisure Retail Mobile Visitors Desktop Visitors

19 Methodology 19 This is the longest continuously running quarterly report on digital marketing trends. Since this report s inception, IgnitionOne has tracked more than 130 billion impressions and nearly 5 billion clicks on Google and Yahoo!/Bing search networks, Google AdEx, the IgnitionOne DSP and other networks from January 1, 2006 through June 15, All trend metrics are reported using a same-client basis which may vary between reports. Additional reports can be found here: About IgnitionOne IgnitionOne simplifies life for marketers, providing deeper insights and robust targeting of individuals through the use of proprietary engagement scoring and integrated marketing and advertising solutions. IgnitionOne offers a full-featured digital marketing hub which significantly improves performance across all devices and paid and owned channels. IgnitionOne allows marketers to better understand their customers and activate personalized 1:1 messaging across search, display, social, mobile, , and website personalization. With a global footprint of over 450 employees in 17 offices across 10 countries, IgnitionOne is one of the largest independent marketing technology companies in the world, currently scoring over 300 million users monthly in 75 countries and powering more than $60 billion in revenue each year for leading brands, including General Motors, CenturyLink, Bridgestone, La Quinta and Acer, as well as advertising agencies such as 360i, GroupM and Zenith Optimedia. For more information, please visit follow the company on or visit the blog at: