As we dive into 2017, paid search is as important as ever to the digital marketing mix. If you want to make the most of your paid search in the coming year, you’ll first need to understand the impact it had last year.
Merkle recently published their Digital Marketing Report for Q4 2016. Let’s take a look at their findings.
Paid Search Growth
Paid search has been growing strong since late 2015, after Google added a third text ad above organic links on phones and doubled the size of Product Listing Ads (PLAs) on phones. From Q4 2015 to Q4 2016, ad spend went up 19 percent, and click traffic went up 20 percent.
The same positive trend held true for PLAs, which saw more than twice as much spend growth as text ads (30 and 12 percent, respectively). PLA click traffic fared particularly well on mobile devices – 62 percent to desktop’s 30 percent.
Overall PLA traffic share increased only slightly to just under 48 percent in Q4, and some retailers even saw text ads gain back some ground.
Looking more closely at ad spend, Merkle found that overall U.S. paid search grew 14 percent year-over-year.
Google’s search spend went up 19 percent. The company reduced a search spending slowdown by expanding local search ads, adding mobile inventory, increasing the number of PLAs in image searches, and decoupling desktop and tablet bidding.
Spending on Google text ads rose 12 percent in Q4. Desktop text ad spending increased by 8 percent, thanks to advertisers’ renewed ability to segment better performing desktop bids from comparatively ineffective tablet bids.
Google Paid Search Trends by Industry and Device
The retail, B2B and travel sectors saw the most growth in ad spend (as much as 44 percent), and B2B and financial services saw the greatest click growth (25 and 22 percent, respectively). The insurance industry took losses in both ad spend (5 percent) and clicks (18 percent).
Phones took the lion’s share of click and spend share across major industries. All six industries saw reduced tablet spend share, with the retail industry displaying the most significant drop. Retail and health advertisers generated the largest share of overall mobile traffic.
Given that tablet click shares were already declining by Q4 2014, it’s not surprising that advertisers continued to shift funds away from tablets. In Q4 2016, tablets produced 4 percent fewer clicks than in Q3, while the number of clicks from phones increased by an impressive 14 percent.
These results are mirrored in the report’s analysis of phone and tablet spend share. In Q1 2015, tablets accounted for twice as much spend share as phones, but in Q4 2016, that number has plummeted rather dramatically to 9 percent, while phone spend share hit an all-time high of more than 27 percent.
Google Expanded Text Ads and Ad Positioning
Interestingly, Merkle’s analysis of expanded text ad performance ties in with its analysis of the importance of ad positioning.
Expanded text ads (ETAs) are longer versions of Google’s standard text ads. They offer two 30-character headline fields, one 80-character description field, a more customizable display URL and automatic mobile optimization. As of January 2017, ETAs became the only format for new text ads.
You may expect the switch to ETAs to produce positive results, but the statistics suggest otherwise.
In Q4 2016, ETAs appearing at the top of the page generated a 1 to 3 percent lower click-through rate (CTR) than standard text ads, while those appearing at the bottom of the page produced a slightly higher CTR than standard text ads (though they are a small share of total clicks).
Just as ETAs at the bottom of the page get a higher CTR, third and fourth position top-of-the-page ads got nearly 5 percent of Google’s phone text ad clicks. Smaller advertisers and advertisers using non-brand keywords are seeing the greatest results from lower ad placement.
Phones accounted for a whopping 51 percent of Google search ad clicks in Q4 2016, a sharp 14 percent rise from Q4 2015. However, for Bing Ads and Yahoo Gemini, phones made up only 13 and 27 percent of search ad clicks respectively.
In a similar vein, phone CPC rose by 15 percent, although the overall growth of phone clicks is slowing down.
Google’s Conversion Rate and Search Spend Share
In Q4, Google generated an 11 percent higher conversion rate for non-brand search ad traffic than Bing and Yahoo, a decrease from its 23 percent lead in 2015 (coinciding with its mobile expansion). Google’s conversion rate for desktop search ad traffic was 23 percent higher than Bing’s and Yahoo’s.
Google’s brand conversion rate is 11 percent lower than that of Bing and Yahoo.
Google’s shares of paid search ad spend and clicks were each up by 4 percent, thanks, in part, to users’ widespread transition to mobile devices.
Facebook Growth and Spend
Facebook is another major contender in the world of digital advertising platforms, and its ad spend is growing fast.
In Q4, Facebook ad spend showed a staggering increase of 65 percent compared to the previous year (along with 38 percent year-over-year growth). Facebook advertising had the most impact on mobile devices, including both phones and tablets. Mobile devices made up nearly 60 percent of Facebook’s overall spend share.
Although Facebook’s CPC dropped by 17 percent, its cost-per-thousand (CPM) increased by 12 percent.
Merkle gave us a lot of data in this report, but paid search demands our attention more than ever. Digital advertisers who take heed of its 2016 developments will be that much more prepared for the rest of 2017.