Paid Search Trends Iprospect QUARTERLY REPORT | 2017 Q3

Paid Search Trends iPROSPECT QUARTERLY REPORT | 2017 Q3

By Jessica Freistat, Director, Paid Search and Michael Kelley, Director, Data & Insights

Introduction In a surprising trend, Q3 2017 recorded a quarter over quarter (QoQ) decline in CPC. This marks a departure from the consistent QoQ CPC increases recorded between Q2 2016 and Q2 2017. Primary factors that contributed to this Q3 decrease include:

 Mobile: Advertisers continued to allocate a greater percentage of their budgets to mobile, which has a lower CPC than desktop on Google.  Google’s May 2017 Ad Rank update: An analysis across iProspect’s clients on the impact of this update showed a 4% decrease in CPC for non-trademark terms.  CTR Increases: Search CTR increases have been noted across some advertisers as a result of ongoing testing and refinement of expanded text ads as well as ongoing audience targeting adoption and testing, which positively influence ad relevance, CTR, and Quality Score.

In Q4, CPC is likely to increase during the November/December holiday season as advertisers who are capitalizing on the peak holiday shopping season drive an increase in competition.

While iProspect’s Q2 Google AdWords data showed continued increases in CPC, Q3 2017 saw a QoQ decline in CPC, indicating a shift in cost trending. Year over year (YoY) CPC increases contributed to click declines as advertisers are spending more per click thus receiving fewer clicks within their budget, but QoQ CPC decreases in Q3 mean that costs haven’t continued to increase for advertisers this past quarter.

Shopping investment and volume continue to grow in Q3 2017, once again reaching their highest levels to date. Data showed significant year over year (YoY) declines in Shopping CTR due to an increased number of impressions served, which was attrib- utable to several changes in Shopping ad formats on Google. Despite the lower CTR, Google Shopping Click Share across iProspect’s advertiser set increased 48% QoQ.

Shopping investment and volume continue to grow in Q3 2017, once again reaching their highest levels to date.

For the first time since this report’s inception in 2014, iProspect also analyzed Bing Ads data across iProspect’s advertiser set. Investment in Bing has been growing steadily since Q3 2016 and continues to grow, up 22% YoY in Q3 2017.

The following trends and insights are based on an analysis of data from more than 2,500 Google AdWords and Bing Ads accounts. All of these accounts are managed by iProspect U.S. (though the spend is not confined to U.S. markets), and together they represent more than 220,000 active campaigns, spanning both Search and Shopping ad formats.

Reviewing Overarching Q3 2017 Trends—A Look at Primary KPIs

GOOGLE: CPC DECREASING. SHOPPING GROWING In a surprising deviation from its typical trend, Google’s QoQ CPC dropped. This decrease contrasts sharply with across-the-board YoY CPC increases: 27% overall for Google, 31% for Search, and 15% for Shopping. CPC was also up YoY across all devices: desktop up 28%, mobile up 32%, and tablet up 22% YoY. In Q2, iProspect recorded the highest CPC levels to date, but this trend changed in Q3 with a QoQ CPC decline of 5%. The overall CPC decline was due to declining Search CPC, specifically—7% QoQ—whereas Shopping CPC saw a 5% increase QoQ. In terms of devices, CPC declined QoQ across both desktop (-3%) and mobile (-7%), potentially influenced by Google’s May 2017Ad Rank update. Tablet CPC increased 7% QoQ.

Despite consistent spend levels across the advertiser set, iProspect recorded YoY Google CPC Google impression and click declines of 9% and 23%, respectively in Q3 2017. As noted in Q2, significant YoY upward trends in CPC heavily influenced a corresponding hit all-time peak reduction in clicks as advertisers were forced to pay more per click. The end result: in Q2 2017, but advertisers were driving less traffic for each dollar spent. declined 5% Shopping CTR declined 21% YoY due to YoY increases in the number of Shopping ad quarter over units displaying on the search engine results page (SERP). By contrast, CTR across Search campaigns was up 28% YoY. Desktop Search campaigns saw the highest CTR quarter in Q3. increase at 48% YoY, followed by Tablet (+23%) and Mobile (+5%).

BING: INVESTMENT UP 22% YEAR OVER YEAR Across iProspect clients, Bing investment grew an impressive 22% YoY, with Search investment up 21% and Shopping investment up 37%. Impressions and clicks, however, were down 6% and 13%, respectively due to a 40% YoY increase in CPC. This CPC increase was most notable across Search campaigns, which were up 43% YoY while Shopping campaigns increased only 7% YoY. iProspect speculates this increase may have been influenced by an increase in competition as advertisers increased investment on Bing.

CTR increased 7% YoY across Bing Search campaigns while the search engine saw Shopping campaign CTR decrease substantially by 52% YoY. This drop was influenced by greater numbers of advertisers adopting Bing Shopping as a standard component of their overall Search programs.

iProspect expects to see an increase in overall Bing Shopping traffic in Q4 2017 because of typical holiday season activity and also because of Bing’s recent release of the Shopping Tab.

Taking a Closer Look— Areas of Special Interest

MOBILE: MOBILE CLICK MAJORITY ON GOOGLE, DESKTOP CLICK MAJORITY ON BING Mobile CPC declined 7% QoQ in Q3 2017 after having hit an all-time high in Q2 2017. Because advertisers aggressively increased their YoY mobile investment to align with user trends, mobile CPC increased a substantial 32% YoY, but the corresponding increase in SERP competition is now beginning to level off so we are unlikely to see equally rapid CPC increases moving forward.

Compared to last quarter, the percentage of overall clicks coming from mobile click share on Google rose slightly in Q3 to 61.9% QoQ (vs. 60% in Q2 2017). Desktop and tablet click share were both down at 30.6% and 7.5%, respectively. Looking at YoY numbers, mobile click share increased 17% (up from 53% in Q3 2016), while YoY desktop and tablet click share both declined, by 15% and 32% respectively.

On Bing, mobile CPC increased only slightly YoY (up 2%) in Q3 2017, but was 18% higher than Bing desktop CPC in Q3. This differs from Google, where CPC remains 28% lower for mobile than desktop.

The percentage of overall mobile clicks on Bing was 24% in Q3, much lower than on Google (61.9%). On Bing, desktop still holds the clear majority of clicks at 68%. Q3 tablet clicks were up slightly YoY at 8%. Mobile click share on Bing increased to 24%, up from 17% in Q3 2016. iProspect speculates that default search engines on mobile devices contributed to lower mobile search volume on Bing, and overall mobile search query volume has grown more rapidly on Google vs. Bing.

SHOPPING: GOOGLE SHOPPING INVESTMENT REACHES HIGHEST LEVELS ON RECORD

Google Shopping Growth Continues Google Shopping investment and clicks both continue to rise, and both were the highest they’ve ever been in Q3 2017. Impressions increased 79% YoY and clicks increased 42% YoY. Google Shopping CPC increased 15% YoY, and further increases are expected in Q4 2017 due to increased investment and competition during the holiday season. Google Shopping CPC remains lower than Search CPC and was 17% lower than Google Search CPC in Q3 2017. Comparatively, Google Shopping CPC was 27% lower than Search ads in Q2 2017.

Q3 Google Shopping volume continued to grow at a faster rate on mobile than any other device, with mobile impressions increasing 93% YoY and clicks increasing 54% YoY. Comparatively, desktop clicks increased 30% and tablet clicks decreased 2% YoY.

Google Shopping CTR Decreases Overall CTR for Google Shopping decreased 21% YoY, which was a primary driver of the aggregate CTR decrease noted in the overarching trends for the quarter. As was the case in Q2, this CTR decrease was primarily due to an increase in the number of ad units Google shows on the SERP per query, i.e. the number of impressions recorded for each advertiser. These changes were the result of several SERP updates, including:

 Expansion of the mobile Shopping carousel from 17 to a maximum of 30 offers per query  An increase in the number of Shopping ad units on the Desktop SERP  Addition of a new carousel format on YouTube  Addition of Shopping ads on Image search  Addition of Showcase Shopping ads and Shop the Look ads, which show for broader queries and allow Google to monetize higher-funnel searches while offering advertisers the ability to capture more visibility with an attractive Shopping ad unit

In an effort to understand how these SERP updates impacted Shopping CTR, a careful examination of the effects of the mobile shopping carousel update uncov- ered several specific insights. Prior to the April update, there were a maximum of 17 potential ad placements on mobile per query. After the update, there are now up to 30 placements available. This expansion of ad space drove an increase in competition from other advertisers, but it also gave each advertiser the opportunity to show additional ads per query because each user can show multiple Shopping ads per auction. Additionally, although the user can only access the additional units by swiping through the carousel, Google records each ad as an impression whether the user swipes to view the full set or not.

Since the mobile Shopping carousel update in April, iProspect’s advertiser set saw a 5% increase in overall available mobile impressions and a 48% higher Shopping Click Share than in Q2 2017.

Since advertisers can show multiple ads per search term in Shopping campaigns, iProspect analyzed click share across Google Shopping. This analysis made it possi- ble to determine the number of clicks each individual advertiser received out of the total available clicks. Since the mobile Shopping carousel update in April and corresponding opportunity to show more ads on mobile, iProspect’s advertiser set saw a 5% increase in overall available mobile impressions and a 48% higher Shopping Click Share than in Q2 2017.

Bing Shopping Investment Fluctuates Throughout 2017 In contrast to Google, Bing Shopping investment peaked in Q4 2016 and has been changeable throughout 2017. CPC on Bing Shopping was higher than both Search and Shopping on Google throughout 2017. Like Google, Bing Shopping investment is expected to increase during the Q4 2017 holiday season.

Verticals In addition to the overall trends, Q3 performance for three key verticals was analyzed in depth:

RETAIL: GOOGLE SHOPPING AND BING SHOPPING/SEARCH ON THE RISE, CPC DECLINES Shopping continues to grow and reached the highest level recorded in Q3 2017. Both overall Retail Shopping investment and the percentage of spend allocated to Shopping saw YoY increases on Google and Bing, with Google Shopping making up 29% of clicks and Bing Shopping accounting for 17% in Q3 2017.

YOY RETAIL CLICK TRENDS BY AD TYPE

AD TYPE/ENGINE Q3 2016 Q3 2017 YOY

Google Shopping 15% 29% 87%

Google Search 85% 71% -16%

Bing Shopping 10% 17% 76%

Bing Search 90% 83% -8%

Overall Retail CPC on Google increased 40% and CTR decreased 21% YoY. Although CPC was up YoY, CPC decreased QoQ across all devices, with mobile CPC down 9%, desktop CPC down 4%, and tablet CPC down 2%.

Both Shopping and Search CPC increased 34% YoY. Within Search campaigns, mobile CPC and desktop increased 65% and 12% respectively, while tablet CPC decreased 5%. Within Shopping campaigns, mobile CPC increased 46% and desktop CPC increased 36% YoY, while tablet CPC remained nearly steady. QoQ, Search CPC on Google is down 13%.

Retail investment on Bing increased 25% YoY, with a substantial 126% YoY increase in Bing Shopping campaign investment. Bing Search CPC increased 21% YoY, while Shopping CPC increased 60% YoY due in part to substantial numbers of advertisers adopting Bing Shopping. Bing’s Shopping CPC was 40% higher than its Search CPC in Q3 2017.

AD TYPE DEVICE Q3 CPC YOY

Google Search Desktop 12%

Google Search Mobile 65%

Google Search Tablet -5%

Google Shopping Desktop 36%

Google Shopping Mobile 46%

Google Shopping Tablet -1%

B2B: CPC DECREASES, CTR INCREASES In Q3 2017, B2B advertisers saw significant YoY decreases in CPC and increases in CTR. Google CPC decreased 30% while CTR increased 50%. In addition, Google CPC decreased YoY across all devices: down 32% for desktop, 27% for mobile, and 12% for tablet.

The growth in B2B traffic and CTR indicates that these brands are starting to embrace mobile.

Search trends tend to differ substantially for the B2B vertical vs. other verticals. For example, 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. The growth in B2B traffic and CTR indicates that these brands are starting to embrace mobile by continuing to increase mobile investment and focus efforts on mobile optimization as well as more effective mobile measurement and attribution. In addition, B2B clients have also begun to adopt more advanced audience targeting and segmentation strategies across all devices in order to guide the user more effectively through the complex conversion journey.

Google YoY CTR increases were also consistent across all devices: up 61% on desktop, 33% on mobile, and 16% on tablet. Click share, however, varied by device: mobile click share increased 10%, whereas desktop and tablet click share decreased 2% and 34% respectively.

Like Google, B2B also saw significant CPC declines on Bing. YoY, Bing’s overall B2B CPC decreased 57%, with B2B advertisers seeing CPC decreases of 81% on desktop and 14% on mobile. Bing B2B CTR was down 11% on desktop, but increased 144% on mobile as B2B advertisers continue to focus more energy on mobile optimization initiatives and investment.

As noted in our Q2 trends report, B2B advertisers should focus on measuring lead quality and anticipated lifetime value (LTV) in order to optimize budget spent while continuing to use more so- phisticated audience segmentation strategies that help allocate budget toward the highest-value customer segments.

CPG: CPC AND CTR BOTH UP Overall, CPG CPC increased 69% YoY in Google and 61% YoY in Bing. CPG also saw YoY CTR increases: 153% on Google and 31% on Bing. Desktop saw the greatest YoY CTR increase on Google: up 225%. CPG tablet CTR was also up substantially YoY: 175% on Google. And CPG mobile CTR is up 45% YoY.

Bing saw a similar upward CTR trend with YoY CTR increases of 16% on desktop and 56% on mobile. Contrary to overarching search trends, QoQ CPG Search CPC increased—up 3% in Google and 13% in Bing. QoQ, CTR for CPG Search is up 28% in Google and 4% in Bing.

YoY CPG Impression volume was down across Google and Bing, partially due to increasing investment in Amazon. Amazon Marketing Services (AMS), hosted on amazon.com, launched in 2012 and operates in an auction system very similar to Google and Bing.

Predicting What’s Next in 2017 As Q4 approaches, the holiday season and the biggest shopping season of the year inches closer. This year, Retail sales are expected to increase 3.1% during the core shopping months of November and December, and Ecommerce sales are projected to increase 16.6%—largely driven by mobile. Advertisers should be well into campaign planning for this holiday season, and many Retailers have already launched their 2017 holiday campaigns.

In order to win in Paid Search, advertisers must capitalize on the many opportunities available to them. Specific opportunities to keep in mind for this holiday season include:

 Support key products in  Build in-market audiences  Activate location extensions, both Search and Shopping for search to find new call extensions, and local on Google and Bing customers who are ready inventory ads to drive to buy (available now in Bing) customers in-store  Leverage remarketing lists specific to holiday shoppers  Use ad customizers to create  Consider messaging to highly targeted messaging self-lifters and encourage  Build remarketing lists ahead for specific audiences and/ them to “treat themselves” of time to capture intended or devices, and to create a users countdown feature for key  Perform a health check of your product feed to ensure  Take advantage of existing promotions or to lead into Black Friday to create a sense up-to-date pricing and CRM data to re-engage cus- availability information, tomers who have purchased of urgency for customers and entice them to purchase flesh out titles and product during past holiday seasons descriptions, and verify that  Build Similar Audiences to  Deploy Dynamic Search Ads all products have the correct create lookalike user lists off to match specific long-tail product identifiers (such remarketing lists search queries as GTINs)

 Consider using location-based  Ensure you have a compre-  Explore advertising bidding strategies around hensive budget flighting opportunities on Amazon brick and mortar locations and monitoring plan in place, (more than half of all users and are aware of Google’s start their product purchases  Use all relevant ad extensions recent budget policy update on Amazon, and 9 in 10 to maximize the impact of ads consumers will check and take up more real estate  Consider ways to unite Amazon even if they find on the SERP online and in-store experi- a product they want on ences throughout the holiday another Retailer’s site)  Consider advertising season (36% of consumers opportunities with will research products and Google Express compare prices online while shopping in store)

Additionally, advertisers should consider consumers’ increasing adoption of voice search this season. This year, virtual assistants and voice search are expected to play ABOUT THE DATA a bigger role in the research phase of holiday purchases. According to an April 2017  Based on Google Toluna survey, two thirds (67%) of virtual assistant users in the U.S. said they use the AdWords and Bing devices for shopping and price comparisons. In order to optimize holiday paid search Ads data campaigns for voice, advertisers should include longer, more conversational, ques-  Includes Google Search, tion-based keywords including questions such as who, what, when, where, why, and Google Shopping, Bing how, and qualifying phrases such as near me. Search, Bing Shopping

 Does not include YouTube Lastly, according to the National Retail Federation, 54% of consumers will begin re- or the Google Display searching holiday purchases in October (or earlier). Although conversions might not Network pick up until closer to the holidays, it’s important to be present when customers start their research. So, if your holiday campaigns are not yet live, time is of the essence in order to be in the consideration set of these early shoppers. Happy Holidays!

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 ser- viced out of Boston. A passionate marketer with over 7+ years of digital experience, Jessica thrives on driving business performance while making meaningful connec- tions 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 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.

Additional contributors include Jessica Dearien, VP, Head of Paid Search and Andrew Ford, Director of Data Science.

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