216 Text v Product Ads Social Mobile What s Next 216 Cross-Channel Marketing Report Marin Search Marin Social Marin Display
Introduction 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 214 and 215 as well as Facebook Shopping ads since 215, 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 216. Methodology To create this report, we sampled the Marin Global Online Advertising Index, analyzing a representative set of enterprise retailers spending over $1, 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 215 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 (214 and 215). 2 The State of Shopping Ads: 216 marinsoftware.com
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 214 and 215 for shopping ad spend, with an average of 85% more spend during November than during the beginning of the year, versus 5 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 215 and early 216, partially due to inclusion of Bing Shopping Campaigns. Shopping Ad Spend Shopping Ad Spend: November Peaks 25 2 15 1 5 = Shopping ad spend Normalized to January 215 85 % more spend in November vs. the beginning of the year 15 % Jump During the holiday season Holidays The State of Shopping Ads: 216 marinsoftware.com 3
Shopping Ad Spend Share Ad Type Spend Share: Shopping on the Rise 1 18 % Jan 214 8 6 4 2 28 % Mar 216 = Text ad = Shopping ad 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. Ad Type Click Share: Shopping up Year over Year 1 8 6 4 2 = Text ad = Shopping ad 4 The State of Shopping Ads: 216 marinsoftware.com
CPC: Stable Performance for Shopping Ads 1 8 6 4 2 = Text ad = Shopping ad 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 214, in 215, 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. CTR: Comparable Performance 1 8 6 4 2 = Text ad = Shopping ad The State of Shopping Ads: 216 marinsoftware.com 5
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. Click by Device 25 2 15 55 % of shopping ad clicks are now on a smartphone 1 5 Jan 14 Apr 14 July 14 Oct 14 Jan 15 Apr 15 July 15 Oct 15 Jan 16 Apr 16 = Smartphones = Tablets = Desktops Normalized to January 215 6 The State of Shopping Ads: 216 marinsoftware.com
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 215, with clicks growing almost 15 above the baseline compared to January of the same year, versus 25% for desktops and tablets. 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 215 and the trend continues in 216 so far. In November 215, smartphone spend reached almost 4 above baseline of what it was in the beginning of the year, versus 15 and 13 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. Spend by Device: Chasing the Mobile Shopper Peak Spend Growth 5 4 3 35 % Growth 2 1 Smartphones holiday season Dec 215 = Smartphones = Tablets = Desktops The State of Shopping Ads: 216 marinsoftware.com 7
Peak Spend Growth Click Through Rate 1.6 1.2 Cost Per Click $ 1. $.8 15 % Growth Desktops & tablets Nov 214.8.4 Jan 216 Feb 216 Mar 216 $.6 $.4 $.2 Jan 216 Feb 216 Mar 216 = Smartphones = Tablets = Desktops 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. 8 The State of Shopping Ads: 216 marinsoftware.com
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 9 of spend on mobile in Q1 216. Across all verticals, we usually see mobile clicks and spend reach around 75-8 share, but it is particularly high for retail. Social Share of Clicks 1 8 6 4 Spend on Mobile - Q1 216 2 Jan 15 Mar 15 May 15 July 15 Sept 15 Nov 15 Jan 16 Mar 16 = Mobile = Desktop 95 % Clicks Social Share of Spend 1 9 % Spend 8 6 4 2 Jan 15 Mar 15 May 15 July 15 Sept 15 Nov 15 Jan 16 Mar 16 = Mobile = Desktop The State of Shopping Ads: 216 marinsoftware.com 9
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. Social CTR 1.8 1.5 1.2.9.6.3 Social CPM $ 8. $ 6. $ 4. $ 2. Jan 216 Feb 216 Mar 216 Jan 216 Feb 216 Mar 216 = Mobile = Desktop 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. 1 The State of Shopping Ads: 216 marinsoftware.com
216 What s Next Last year, we forecast that 3 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 216: n 4 of all shopping ad dollars will be on a smartphone Clicks and Spend Share are Stabilizing 35-4 % Ad clicks & spend share n n 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 4 % Smartphone clicks & spend share By December 216 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 35-4 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 4. 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. 37 % Paid Search Clicks will be on a shopping ad 4 % Shopping Ad Dollars will be on a smartphone The State of Shopping Ads: 216 marinsoftware.com 11
Key Takeaways n 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. n 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. n 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 214 and 215 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. To learn more about Marin Software shopping solutions, visit marinsoftware.com/shopping 12 The State of Shopping Ads: 216 marinsoftware.com
Text v Product Ads Shopping Ad Spend: November Peaks 25 2 Shopping Ad Spend Shopping Ad Spend Share Millions ($) 15 1 5 15 % Jump 18 % 28 % = Shopping ad spend Normalized to January 215 During the holiday season Jan 214 Mar 216 85 % more spend in November vs. the beginning of the year Shopping Ads now make up 1 out 3 of clicks on Search Ad Type Click Share: Shopping up Year over Year 1 8 6 4 2 Holidays = Text ad = Shopping ad Data analyzed from Marin Search Marin Social Marin Display Social Social Share of Clicks 1 Spend on Mobile - Q1 216 8 6 4 2 Jan 15 Mar 15 May 15 July 15 Sept 15 Nov 15 Jan 16 Mar 16 = Mobile = Desktop 95 % Clicks 9 % Spend Social CTR 1.8 1.5 1.2.9.6.3 Jan 216 Feb 216 Mar 216 Social CPM $ 8. $ 6. $ 4. $ 2. Jan 216 Feb 216 Mar 216 Social Share of Spend 1 8 6 4 2 Jan 15 Mar 15 May 15 July 15 Sept 15 Nov 15 Jan 16 Mar 16 = Mobile = Desktop = Mobile = Desktop Mobile Click by Device 25 2 15 1 5 Click Through Rate 1.6 1.2.8.4 Cost Per Click $ 1. $.8 $.6 $.4 $.2 Jan 14 Apr 14 July 14 Oct 14 Jan 15 Apr 15 July 15 Oct 15 Jan 16 Apr 16 Jan 216 Feb 216 Mar 216 Jan 216 Feb 216 Mar 216 = Smartphones = Tablets = Desktops Normalized to January 215 = Smartphones = Tablets = Desktops 55 % of shopping ad clicks are now on a smartphone 15 % Growth Desktops & tablets Nov 214 Peak Spend Growth 35 % Growth Smartphones holiday season Dec 215 Spend by Device: Chasing the Mobile Shopper 5 4 3 2 1 = Smartphones = Tablets = Desktops 216 What s Next By December 216 Clicks and Spend Share are Stabilizing 37 % Paid Search Clicks 4 % Shopping Ad Dollars 35-4 % 4 % will be on a shopping ad will be on a smartphone Ad clicks & spend share Smartphone clicks & spend share Methodology 35 % jump in Retail Spend this holiday season Where appropriate, all monthly key performance indicators were normalized to January 215 instead of exposing absolute values to more clearly highlight overall trends. A longitudinal analysis was applied for year-over-year performance. For more information on our methodology, read the complete report. Brought to you by For key takeaways and advice, read the Cross-Channel Marketing Report at marinsoftware.com/shopping216