This past week Merkle released its Q2 2016 edition of their Digital Marketing Report. Now, I know what everyone was thinking when they saw it come out – “I love Merkle, and I love learning about macro trends in the Digital Marketing industry – but I just don’t have time to read 30 pages of content and get that Price Extensions ACE test live this week.”
I’ve been there. I get it.
The bad news is that I don’t yet have meaningful results to share on Price Extensions. But the good news is that I have one short, digestible summary of the Merkle Q2 2016 DMR just for you. Enjoy!
The First Big Thing:
Expanded Text Ads show good lifts…just not on Brand.
With the introduction of Expanded Text Ads and the recent shift to the green ad icon, Google continues to strive to make paid ads look more and more Natural. This caps a tough year on Organic Search, which saw visit growth down 7% with the rollout of four ads top of page and more mobile search. (Sorry, organic. L )
However, the change didn’t quite meet the +20% CTR forecast for which Google had hoped. Best case was a 16% gain in the Non-Brand landscape on desktop devices that, surprisingly, did not boost Quality Score or Position. Results tailed off quickly on Mobile (+8%) and Tablet (+4%).
The story gets worse on Brand terms where ETA CTR was flat to traditional text ad formats on Desktop and Tablets. Merkle points out (and I agree) that this is not shocking, as consumers more naturally default to clicking through to the brand site. While I expect advertisers will learn how to utilize the second headline to find CTR wins over time, it’s not surprising to see ETAs coming out of the gates a little slower on brand.
Now, that hypothesis does not transfer cleanly to mobile where CTR showed a 4% drop. With two headlines and little knowledge of how many characters will fit on the first line of different screens, this ad format can look sloppy and awkward depending on how that second headline displays. Advertisers – or maybe Google – will find how to format it to make this look better over time, but we can’t take too long. Beginning October 26, ETAs are taking over as Google removes the ability to create or edit standard text ads. Start your preparations now!
(As an aside, can we collectively agree that the appropriate acronym for Expanded Text Ads going forward should be XTA and not ETA to avoid any miscommunication around my arrival time? Yes? Cool.)
The Second Big Thing:
Product Listing Ads grew…a lot.
Google PLAs were up 73% in Q2 2016 vs Q2 2015 which is surprising considering that it’s not a new ad format that suddenly saw growth from rolling out of beta. The kicker is that spend from PLAs was only +43% as the majority of the growth came from Mobile and Search Partners volume which are lower CPC segments of traffic.
Where did all that Search Partner traffic come from? As with most things in life, we can’t have the good without the bad. Bing Product Ads fell Y/Y for the first time since their launch in 2013 largely driven by Yahoo decreasing the percent of times it used the Bing ad format in favor of Google’s PLA format (Et tu, Brute?). As a consolation for Bing, Google CTR for Non-Brand landscapes fell to -14% that of Bing/Yahoo with the increase in PLA traffic.
The Third Big Thing:
Google CPCs are down…sort of.
Total search spend hit a four quarter low for Y/Y growth. The culprit? Google CPCs fell 9% due to numerous factors: the increase of lower CPC mobile volume in the second half of 2015, more volume coming from Search Partners, and the four ads top of page change that increased click volume coming from less expensive positions on the page.
Also impactful was the 40% growth to brand CPCs on Google in Q2 of last year as they artificially raised the minimum Top of Page CPC. It’s generally difficult to grow relative to a 40% lift.
From Merkle: “Advertisers are still paying much higher CPCs than they were to start 2015”
People don’t forget.
Merkle also reports seeing another wave of brand CPC inflation at the very end of Q2. They also reported seeing a fourth ad showing at the top of the page on mobile and I would bet those two pieces are related. In either case, keep an eye out for more in the Q3 DMR.
Tangent: Isn’t it interesting that we put the “s” at the end of CPC? Strong parallels to the pluralization of mother-in-law here, but no one thinks about it because we generally don’t use acronyms for mothers-in-law.
The Fourth Big Thing:
Display spend continues to grow…just not in prospecting.
While traditional search spend grew 19% Display soared Y/Y with a 62% gain to marketing spend. This came in large part through Facebook (+121% growth) as advertisers invested more in traditional mediums and tested Dynamic Product Ads. Still, the focal strategy was retargeting which accounted for 2/3 of display spend. I expect that this mix will only continue to grow as marketers struggle to demonstrate the value of display prospecting and more opportunities to connect searchers to retargeting efforts are developed.
Merkle also mentioned that Display spend is expected to surpass search spend in the near future. For context, spend on the Google Display Network accounts for 12% of digital spend within the Google platform. On phone and tablet, GDN is 28% of spend so the ever-increasing traffic shift to these devices will help accelerate that but I’m still curious to hear how Merkle defines the “near future.”
The Fifth Big Thing:
Mobile becomes more dominant in the search landscape…and so does Google.
Phone click growth held steady at a 100% Y/Y lift while CPCs were down 3% Y/Y. Both largely explained by Google pushing to show 3 ads top of page on mobile. You might be thinking “But only Google made that change, there should be other factors. What about Bing? Gemini?” Simply, Google is mobile ad search right now with 95% share of PS clicks on phones in Q2. And as mobile click traffic grew Y/Y Google saw its share of all ad search clicks lift 7 points to 86%.
It’s also worth noting that with its continued blistering growth, mobile surpassed desktop on Google for share of clicks at 43%. Think back to Merkle’s note of seeing instances of mobile ad depth mirroring desktop for Google with four ads showing top of page. While this will help to drive additional click volume for advertisers, it’s worth noting that the additional presence will also drive higher CPCs for advertisers who wish to maintain the 1, 2, and 3 positions. I can’t imagine that side effect is unintentional as Google saw mobile contribute to 39% of clicks across all engines but only 20% of spend.
It’s also difficult to talk mobile without talking Apple. In September, Safari allowed third-party ad blocking which many feared would be devastating to mobile search. That did not happen but in Q2 2016 we did see Apple’s share of clicks drop 3 points. While I expect Apple is not thrilled about this change the company can take comfort in the fact that across devices they still account for almost 40% of paid clicks which is up from 35% a year ago.
I hope this summary provides you with enough conversational ammo to get through your morning elevator ride with your boss. However, as the saying goes “Knowledge is Power.” Now that your Price Extension test is live, I highly encourage you to read through all 30 pages of Merkle’s Digital Marketing Report and share your thoughts. Give us a shout @RedVentures and @PatrickMcKendry!
Patrick McKendry has been a paid search analyst at Red Ventures for the past two and a half years. He spends his weeks optimizing search accounts and driving incremental value to partners and his weekends playing Frisbee and eating at Duck Donuts.