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Paid search trends Q2 2017

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Paid search trends Q2 2017

  1. 1. Paid Search Trends i P R O S P E C T Q U A R T E R LY R E P O R T: 2017 Q2 By Jessica Freistat, Michael Engels and Michael Kelley
  2. 2. Executive Summary 02 i P R O S P E C T Q U A R T E R LY R E P O R T PA I D S E A R C H T R E N D S | 2 0 1 7 Q 2 © 2 0 1 7 i P R O S P E C T. A L L R I G H T S R E S E R V E D Q2 was another costly quarter for paid search advertisers. iProspect’s Q2 year-over-year (YoY) Google AdWords data showed that while paid search continues to be an outstanding performance media channel, continued CPC increases drove costs to the highest level recorded since the inception of this report in 2014. This CPC increase has, in turn, contributed to overall click declines by forcing advertisers to spend more per click within constrained budgets, thus reducing the total number of clicks they can afford. Analysis shows that the CPC increases were driven by two primary factors: • Competitive pressure on the mobile search engine results page (SERP) increased as advertisers continued to invest more in mobile to align with device-level search trends • An update to Google’s Ad Rank calculation, which began rolling out in May, placed more weight on keyword bids, resulting in a corresponding reduction of the importance of other factors such as Quality Score Shopping (PLA) investment and volume continue to grow and are higher than they have ever been. This growth has been partially driven by the addition of the new Shopping ad formats Google has rolled out over the past year, several of which contain more PLA product units served per query or target higher funnel queries. Both these attributes increase overall inventory and contribute to lower Clickthrough rate (CTR) for Shopping campaigns as more impressions are served. Along with the updates to Shopping ads, Google continues to improve the sophisti- cation of its audience targeting capabilities within Search. Advertisers can help offset the rising CPC by leveraging these new segmenting features to efficiently funnel budget toward the most valuable customers. In addition to implementing advanced audience targeting, advertisers should also customize ad copy for each audience segment by utilizing IF statements and taking advantage of the increased character limit of the Expanded Text Ad format. These tactics will help advertisers develop targeted testing plans that ensure ad relevance and peak ad performance. The following trends and insights are based on an analysis of the data from more than 1,800 Google AdWords accounts. All of these accounts are managed by iProspect U.S. (though the spend is not confined to just U.S. markets), and together they represent more than 200,000 active campaigns, spanning both Search and Shopping (PLA) campaigns.
  3. 3. 03© 2 0 1 7 i P R O S P E C T. A L L R I G H T S R E S E R V E D i P R O S P E C T Q U A R T E R LY R E P O R T PA I D S E A R C H T R E N D S | 2 0 1 7 Q 2 Overarching Q2 2017 Trends — A Look at Primary KPIs Despite consistent spend levels across our advertis- er set, iProspect recorded YoY impression and click declines of 16% and 27.5% respectively. Significant upward trends in CPC heavily influenced the YoY reduction in clicks—as advertisers were forced to pay more per click, the power of their ad dollars to drive traffic was greatly diminished. Earlier this year, in Q1 2017, iProspect recorded what was then the highest overall CPC we’d seen across our client set. This upward trend in CPC has contin- ued into Q2, resulting in a new all-time-high CPC. Overall, CPC increased 13% over the previous S O U R C E : i P R O S P E C T S E A R C H & S H O P P I N G C P C Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 S E A R C H & S H O P P I N G C L I C K S Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017
  4. 4. quarter and 36% YoY. These increases applied to all devices with the largest increase in mobile (up 52% YoY), followed by desktop and tablet at 33% and 18.5% growth YoY, respectively. As iProspect anticipated, mobile CPC has continued to close in on desktop CPC and has reached 76% that of desktop (up from 71% in Q1). In May, Google announced a change to Ad Rank, the value Google uses to determine each advertiser’s ad position in a given auction. The May update increased emphasis on the keyword bid in the calculation of ad position and CPC. At the same time, the update reduced the importance of other ranking factors including Quality Score. This update has contributed to the recent increases in CPC and decreases in Impression Share, both of which have been particularly significant on highly competitive queries for which an advertiser is currently bidding into positions one through three. 04© 2 0 1 7 i P R O S P E C T. A L L R I G H T S R E S E R V E D i P R O S P E C T Q U A R T E R LY R E P O R T PA I D S E A R C H T R E N D S | 2 0 1 7 Q 2 This upward trend in CPC has continued into Q2, resulting in a new all-time-high CPC. Looking ahead, we believe this update will result in higher costs for some advertisers this year. In the past, quality score has played a major role in keeping CPC low for trademark keywords. Because the latest update has reduced the weight of quality score, that factor provides less of a counterbalance. However iProspect anticipates that higher costs will be partially mitigated by reduced costs for non-brand, which are the result of advertisers investing more in mobile. CPC is still a bit lower on mobile than desktop in most cases, and the initial impact of this update appears to have affected desktop to a much greater degree than mobile. iProspect’s initial analysis, one month after Google’s Ad Rank update, showed an 8% CPC increase for trademark terms and a 4% decrease for non-brand. Advertisers should continue monitoring the effects of this update closely so they can make adjustments and find their sweet spot between the optimal lowest bid and most desirable impression share.
  5. 5. i P R O S P E C T Q U A R T E R LY R E P O R T PA I D S E A R C H T R E N D S | 2 0 1 7 Q 2 05© 2 0 1 7 i P R O S P E C T. A L L R I G H T S R E S E R V E D On the CTR side of things, we saw an overall 13% YoY decrease across all devices. The largest YoY decrease was on mobile (down 25% YoY), followed by tablet (down 18%) and desktop (down 4.5%). Compared to Q1, CTR declined 9% overall with mobile seeing the most substantial quarter- over-quarter decline of 17%. For the same period, desktop remained even and tablet decreased 4%. Overall, these declines are easily explained by a closer look at trends by ad type. The CTR for Search ads actually increased 21% YoY, but the CTR for Shopping declined 16%, largely due to the launch of new ad formats, released over the past year, which display more Shopping units per query and record a higher number of Impressions. S E A R C H A N D S H O P P I N G C P C B Y D E V I C E S O U R C E : i P R O S P E C T Desktop Mobile TabletsKey: S E A R C H & S H O P P I N G C T R Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017
  6. 6. 06© 2 0 1 7 i P R O S P E C T. A L L R I G H T S R E S E R V E D i P R O S P E C T Q U A R T E R LY R E P O R T PA I D S E A R C H T R E N D S | 2 0 1 7 Q 2 Mobile Mobile CPC has been consistently on the rise since Q1 2016, increasing 17% from Q1 to Q2 of this year and 52% YoY. Mobile impressions increased 18% YoY while mobile clicks declined 12%. The decline in mobile clicks is heavily influenced by the 52% YoY increase in mobile CPC. The continuously rising mobile CPC is largely a result of the mobile SERP becoming increas- ingly competitive as advertisers shift a greater percentage of their budgets to mobile in order to align with mobile’s increasing share of searches. Increased mobile investment is also fueled by the advanced sophistication of emerging attribution methodologies and online-to-offline measurement tactics that allow marketers to assign value to mobile traffic with a greater degree of accuracy. Taking a Closer Look: Areas of Special Interest 60% 8% 32% S O U R C E : i P R O S P E C TDesktop Mobile TabletsKey: 49% 11% 39%Q2 2016 SEARCH & SHOPPING CLICK SHARE BY DEVICE Q2 2017 SEARCH & SHOPPING CLICK SHARE BY DEVICE Mobile CPC continues to reach new heights and closes the gap with desktop
  7. 7. 07© 2 0 1 7 i P R O S P E C T. A L L R I G H T S R E S E R V E D i P R O S P E C T Q U A R T E R LY R E P O R T PA I D S E A R C H T R E N D S | 2 0 1 7 Q 2 Q2 also saw continued increases in mobile click share, with 60% of clicks coming from mobile vs. 32% from desktop and 8% from tablet. Mobile click share increased 22% YoY as user search trends drove advertisers to spend ever larger percentages of their paid search budgets on mobile. Compared to other devices, tablet saw the most significant declines in volume (-49% YoY) and the most modest increase in CPC (up 18.5% YoY). For advertis- ers who see strong performance on tablet because their customers are frequent tablet users, these trends may create the potential for a more efficient CPC based on there being less competition. Google Shopping/Product Listing Ads (PLA) Shopping volume was another figure that was higher than it’s ever been in Q2 2017. Impressions increased 78% YoY while clicks increased 49% YoY. CPC increased only 8.5%—a modest increase compared to the 45% YoY CPC increase recorded for Search ads. Shopping CPC remains lower than Search ads at an aggregate level, and Shopping CPCs were 29% lower overall than Search in Q1 2017. However, it’s important to recognize that Shopping is an inherently retail ad type, and for retail clients CPC was 11% higher for Shopping ads than for Search ads. S H O P P I N G C L I C K V O L U M E Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q1 2017 Q2 2017 Q4 2016 Q2 2017 recorded highest historical Shopping volume
  8. 8. i P R O S P E C T Q U A R T E R LY R E P O R T PA I D S E A R C H T R E N D S | 2 0 1 7 Q 2 08© 2 0 1 7 i P R O S P E C T. A L L R I G H T S R E S E R V E D Mobile volume of Shopping ads grew at a faster rate than any other device, with mobile impressions more than doubling (+102% YoY) and clicks increasing 79% YoY. Comparatively, desktop and tablet clicks increased only 18% and 9% YoY respectively. Overall, CTR decreased for Shopping, resulting in the aggregate CTR decrease in the overarching trends noted above. The Shopping CTR decrease was primarily due to increases in the number of ad units Google shows on the SERP per query. This additional inventory delivers more impressions for advertisers overall, reducing the percentage of clicks. A specific example of this trend is the update Google released in April 2017 to expand the mobile Shopping carousel from seventeen placements to a maximum of thirty placements per query. Although users can only access the additional units by manually swiping through the carousel, each offer is recorded as an impression, whether a user swipes to view them or not. Naturally, this increase in inventory creates more competition for each query served with a mobile carousel. Advertisers who offer more competitive prices are often at an advantage over competing product listing ads on the SERP. The mobile carousel was not the only Shopping ad format updated during the past year. Google has also released updates to several other ad formats including: • More PLA (Shopping) ad units on the Desktop SERP, which increased opportunities to appear for more queries (albeit amongst greater competition) • A carousel format on YouTube that takes up more space with four ads on the page vs. a couple of ads to the right side of a video on desktop • Shopping ads on Image search Each of these contributed to higher Shopping impres- sion volume. In addition to the expansion of units, Google also released Showcase Shopping ads and Shop-the-Look ads, which both show for broader queries, allow Google to monetize higher-funnel searches, and give advertisers the ability capture more visibility with an attractive Shopping ad unit on these higher-funnel queries.
  9. 9. 09© 2 0 1 7 i P R O S P E C T. A L L R I G H T S R E S E R V E D i P R O S P E C T Q U A R T E R LY R E P O R T PA I D S E A R C H T R E N D S | 2 0 1 7 Q 2 S O U R C E : i P R O S P E C T Vertical Deep Dives In addition to the overall trends, we took a closer look at Q2 performance for three key verticals: Retail Q2 retail CPC increased (up 48% YoY) and CTR decreased (down 21% YoY) at a faster rate than overall YoY Search and Shopping trends. Q2 retail Shopping CPC increased a notable 27% YoY, while Search CPC increased at an even higher rate of 49% YoY. Within retail Search campaigns, mobile CPC recorded the highest increase of all devices, more than doubling (up 101% YoY). Comparatively, desktop was up 17% YoY and tablet decreased 2% YoY. Within Shopping campaigns, mobile CPC increased 62% YoY and desktop CPC increased 22% YoY, while tablet CPC decreased 10% YoY. Q2 2017 RETAIL YOY CPC Q2 2017 RETAIL YOY CTR Search Shopping DESKTOP +17% +22% MOBILE +101% +62% TABLET -2% -10% MOBILE -4% -11% DESKTOP +32% -29% TABLET -9% +2%
  10. 10. 10© 2 0 1 7 i P R O S P E C T. A L L R I G H T S R E S E R V E D i P R O S P E C T Q U A R T E R LY R E P O R T PA I D S E A R C H T R E N D S | 2 0 1 7 Q 2 87% 13% 29% 71% Q2 2016 RETAIL SHOPPING CLICK SHARE Q2 2017 RETAIL SHOPPING CLICK SHARE S O U R C E : i P R O S P E C TSearchShoppingKey: While overall retail impressions and clicks declined YoY, Shopping impressions were up 70% YoY and clicks increased 42% YoY as retail advertisers continued to increase their Shopping investment. These increases continue the upward trend of retail Shopping clicks that began in 2014, and click share on Shopping vs. Search has more than doubled YoY. Adoption of Local Inventory Ads (LIAs) is also on the rise for retail advertisers who are able to clear the hurdle of local product and inventory feeds. These advertisers are reaping the benefits of this PLA variation (an enhanced format that includes information about a product’s availability in a nearby store) in the form of higher CTRs than without and a clear advantage over competitors, like Amazon, who do not have a brick-and-mortar location where consumers can get immediate access to competing products.
  11. 11. B2B B2B CPC continues to be some of the most competi- tive—and expensive—in the industry. This is no surprise based on the comparatively high value of each conversion. Contrary to the overarching Search trends, quarter-over-quarter CPC across B2B accounts declined 1%. In general, trends tend to differ quite substantially for the B2B vertical vs. other verticals. This is due to a variety of differentiating factors. For instance, the B2B industry has been slower to adopt mobile, they tend to have more complex conversion processes than other verticals, and, in some cases, these conversion processes are more difficult to complete on a mobile screen. For these and other reasons, mobile and tablet CPCs each decreased 13% in Q2 as compared to Q1. In the first two quarters of 2017, clicks also decreased across all devices in Q2 vs. Q1, but mobile click share continued to slowly increase—landing at 42% in Q2 vs. 38% in Q1. 11© 2 0 1 7 i P R O S P E C T. A L L R I G H T S R E S E R V E D i P R O S P E C T Q U A R T E R LY R E P O R T PA I D S E A R C H T R E N D S | 2 0 1 7 Q 2 B2B advertisers should focus on measuring lead quality and anticipated lifetime value (LTV) in order to optimize budget spent while continuing to use more sophisticated audience segmentation strategies that help allocate budget toward the highest-value customer segments. CPG Similar to overarching Search trends, CPG traffic declined 10% since Q1 of this year, with minimal declines on mobile and the majority of the drop on desktop and tablet. Mobile click share is on the rise, increasing to 64% from 54% YoY. Overall, CPC declined 5% YoY and 6% since Q1. Mobile CPC declined 8% YoY and, contrary to overarching trends, was 13% higher than desktop CPC in Q2. Outside the traditional search engines, CPG advertisers are expanding into auction-based merchandising channels like Amazon in an ongoing effort to bring their shopping experiences online. With 55% of all product searches now taking place on Amazon*, advertisers should definitely explore these opportunities if they want to capitalize on this purchase-ready customer base and defend against competing products. CPG mobile click share is on the rise, increasing to 64% from 54% YoY http://go.bloomreach.com/rs/243-XLW-551/images/state-of-amazon-2016-report.pdf*SOURCE:
  12. 12. i P R O S P E C T Q U A R T E R LY R E P O R T PA I D S E A R C H T R E N D S | 2 0 1 7 Q 2 12© 2 0 1 7 i P R O S P E C T. A L L R I G H T S R E S E R V E D Predicting What’s Next – 2017 Looking ahead, iProspect expects that CPC will contin- ue to rise, and advertisers will need to spend more to achieve the same positioning as they adjust to chang- es created by factors such as the Ad Rank update and increasing competition on the mobile SERP. In anticipation of higher CPC levels being the new normal in 2017, advertisers should take higher expens- es into consideration for budget planning and forecasting over the remainder of this year. Although higher CPC means advertisers will need to spend more to drive the same amount of traffic, many advertisers will see an upside in the form of higher conversion rates and the potential for higher conver- sion values as a result of greater opportunities to make use of more sophisticated audience targeting and highly relevant ads. In addition to RLSA, Customer Match, and Similar Audiences based on RLSA lists, Google also announced the upcoming release of In-Market Audiences for Search and Shopping this year, as well as Similar Audiences for Customer Match lists. Advertisers should start planning for these releas- es now and ensure that they take full advantage of Google’s IF statements for ad copy, which allow advertisers to customize ads based on device and audience lists for increased personalization. Now officially in the Back-to-School shopping season, iProspect expects to see a push from retailers in Search and Shopping in Q3 as school start dates inch closer. This seasonal uptick will be followed by a brief dip once school is in session, followed by a more substan- tial Q4 push heading into the Black Friday/December holiday timeframe. Over the rest of this year, smart retailers with brick-and-mortar locations will invest time and resourc- es to develop and optimize omnichannel strategies that integrated online and offline tactics. Advertisers leveraging in-store visits data in AdWords can now get this data at a geographic level to better align with retail store data. As announced at Google Marketing Next, any retailer who is live on Local Inventory Ads (LIAs) will also be eligible to have their stores’ local inventory available to Google Home and Assistant during Google’s upcoming experimental phase, giving retailers yet another reason to adopt this format. LIAs on Home will let users know which nearby retailers
  13. 13. i P R O S P E C T Q U A R T E R LY R E P O R T PA I D S E A R C H T R E N D S | 2 0 1 7 Q 2 13© 2 0 1 7 i P R O S P E C T. A L L R I G H T S R E S E R V E D Based on Google AdWords data Includes Search and Google PLAs/Shopping Does not include YouTube or the Google Display Network About the Data: carry items they are searching for (i.e., “where can I buy Timberland boots nearby?”) and then offers to direct them to the nearest store. Advertisers can also take advantage of Store Sales Direct, a new tool that allows advertisers who collect customer email information at the point of sale to import this email information into AdWords. This data is then uploaded, along with information about what a customer bought and the value of the sale, and then this combined data is matched to campaigns and extrapolated to represent all clicks. Finally, all advertisers should have an attribution model and measurement plan that is strategically aligned with the business and client needs. This is key to understanding the value of media spend at all touch points along the consumer journey, insight that is particularly relevant in a marketplace that is continuing to shift to mobile and in which there is a steady trend of increasing CPCs. Drilling down into all these details is critical for advertisers who want to be able to accurately identify the cost thresholds and budget allocations that are most profitable across all devices and marketing channels. All advertisers should have an attribution model and measurement plan that is strategically aligned with the business and client needs.
  14. 14. At iProspect, we transform our clients’ businesses by connecting brands with people. Leveraging our suite of services, smart technology, extensive global footprint, and the industry’s best specialists, we provide best-in-class performance strategies to get you the results your business needs. iProspect is the first truly global digital marketing agency, with 4,200+ employees in 91 offices across 55 countries. A trusted partner with an in-depth understanding of consumer behavior, iProspect reshapes brand strategies to meet the fast-paced demands of the convergent world with a focus on exceeding the client’s business objectives. Our global reach, in-depth knowledge of diverse local markets, and exper- tise produce award-winning, performance-based marketing strategies for leading brands such as General Motors, adidas, T-Mobile, Hilton, Sunglass Hut, Microsoft, and many others. iProspect has been named the “Best Agency for Performance Marketing” by iMedia for 3 years in a row, the 2015 MediaPost Search Agency of the Year and iMedia’s Best Agency for Search. For more information, visit www.iProspect.com or follow us on Twitter @iProspect. About iProspect
  15. 15. About the Authors Jessica Freistat, Director, Paid Search Jessica oversees all Paid Search teams in the Boston office and is responsible for the paid search executional excellence, innovation, and account strategy for clients serviced out of Boston. A passionate marketer with over 7+ years’ of digital experience, Jessica thrives on driving business performance while making meaningful connections between brands and consumers. Since joining iProspect in 2010, Jessica has worked in multiple channels, across Fortune 500 clients and various verticals including Retail, B2B, Healthcare, Travel, and Education. Michael Engels, Associate Director, Data & Insights Michael works with both clients and internal iProspect teams with advanced analytics and insights out of the Fort Worth office. His focuses are Attribution, Visualization, Reporting Architecture and productization of Data and Insights along with best practices for consumption of an ever-growing spectrum of data. Michael joined iProspect in 2015 and has a great deal of experience in the Digital Analytics space including time with agencies and client-side within the Travel, Lodging, CPG and financial services verticals. Michael Kelley, Director, Data & Insights Michael works directly with both the iProspect account teams and clients to deliver analytics services that include Measurement Strategy, Attribution, Forecasting, and Reporting & Data Visualization support. Michael joined iProspect in 2010, following his departure from a PhD program at the University of Chicago and has since offered his expertise and insights to various Fortune 500 clients across the Retail, Luxury, CPG, and Travel industries. i P R O S P E C T Q U A R T E R LY R E P O R T PA I D S E A R C H T R E N D S | 2 0 1 7 Q 2 15© 2 0 1 7 i P R O S P E C T. A L L R I G H T S R E S E R V E D
  16. 16. www.iprospect.com © 2 0 1 7 i P R O S P E C T. A L L R I G H T S R E S E R V E D

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