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Smartphone Search Spend Up 117%: RKG Releases Its Q3 Digital Marketing Report with Over 50 Graphs and Analyses

October 14, 2014
Columbia, MD

Leading full-service digital marketing agency, RKG, a Merkle Company, released its Digital Marketing Report today, which covers Q3 2014 trends for paid search, SEO, product ads, social media, display advertising, comparison shopping engines and more. By analyzing data across its client base, which includes 50 of the Internet Retailer Top 500 companies, RKG’s report provides comprehensive and detailed insights into digital marketing trends.

The third quarter of 2014 saw continued growth in paid search spending, as Google saw a 27% increase and Bing saw a 24% increase in ad spend over this time last year. Ad spend on the Facebook Exchange (FBX) was also up 30% for the quarter. As advertisers head into the holiday season on a high note, mobile devices and product ads continue to drive search growth, while social media traffic share continues to vary by site.

Smartphone and Tablet Traffic Share Continues to Grow; Early iPhone 6 Data Shows Higher Conversion Rates

Mobile devices, including smartphones and tablets, now see 38% share of both paid and organic search traffic. 42% of social media driven site visits came on mobile devices, a 13 point increase from this quarter last year. Smartphone ad spend grew 117% year-over-year as advertisers continue to invest in this ad format.

Despite this growth, smartphone revenue-per-click is still 66% lower than desktop. Cross-device conversion estimates from Google show that smartphones should receive 17% more conversions than the total captured by single-device tracking, though factoring in cross-device conversions only closes the RPC gap between smartphones and desktops slightly. Recent releases of iOS 8 and the iPhone 6 may have an impact on smartphone performance, as early data shows that iPhone 6 users are converting at a higher rate than users with earlier models.

Product Ads Continue to Drive Google Growth; Should Accelerate for Q4

Image-based product ads, which consist of Google’s Product Listing Ads (PLAs) and Bing’s Product Ads, continue to drive paid search growth for retailers. Ad spend for product ads increased by 73% over this quarter last year, while text ad spend rose by just 15%. On Google, PLAs continue to compare favorably to text ads, with higher conversion rates and a lower average cost-per-click. On Bing, Product Ads continue to gain traffic share, reaching 10% of non-brand spend in the first year since their release.

Among retailers, PLA share of Google click traffic rose to 27%, compared to 22% in this quarter last year. In 2013, PLA traffic share increased sharply in Q4, a trend that we may see again this holiday season, as the image format of these ads often makes them more attractive to shoppers. Recently Google announced that PLAs are now eligible to show on retail and commerce sites on the Google Search Network, which may also further growth, although the Search Network represents a small percentage of overall Google traffic.

Social Media Traffic Share Continues to Vary by Site, Despite Strong Growth of Facebook, Pinterest

Advertiser spending on the Facebook Exchange increased 30% from Q3 of 2013, as cost-per-click rose by 10%. A new ad layout released in Q2 likely drove up CPCs, as available ad space decreased and competition rose. Despite this, the share of all site visits generated by social media sites increased only slightly from last year, from 2% to 2.2%. Facebook continues to produce a majority of social media visits, at 53%, though it has lost ground to Pinterest, which now contributes 18% of all social media visits on average. These figures may vary widely for individual sites, as demographics and industry continue to have a strong impact on social media contribution.

Other Notable Q3 Highlights:

Paid Search

  • Q3 paid search spending on Google increased 27% Y/Y, a slight acceleration from Q2. This was driven mostly by an 18% Y/Y increase in click volume, though cost-per-click (CPC) also increased by 8% Y/Y.
  • Search spending for Bing Ads rose 24% Y/Y, driven entirely by an increase in click volume as there was no movement in average CPC. A rise in mobile traffic helped to both drive the increase in volume as well as keep CPC stagnant.
  • Google Product Listing Ads (PLAs) and Bing Product Ads spend rose a combined 73% Y/Y, just above Q2 Y/Y growth rate. 27% of all Google search clicks came from PLAs.
  • Smartphones and tablets combined to account for 38% of paid search traffic, up from 30% in Q3 2013. Spend share for smartphone and tablet devices was 28%.

 Organic Search & Social

  • 32% of all Q3 2014 site visits came from organic search, down from 34% in Q3 2013. Optimizations by search engines to make paid ads more appealing continue to drive traffic away from organic results.
  • Organic search click share from smartphones and tablets rose to 38% in Q3, up from 27% a year earlier. iPhone, iPad, and Android device organic traffic share all rose Y/Y.

Comparison Shopping Engines

  • Amazon’s Product Ads’ CSE spend share dropped 10 points Y/Y on the heels of their pushing some advertisers out of the product in Q2.
  • Following two quarters of decline relative to Google PLAs, Amazon Product Ads delivered 11% as much revenue as PLAs in Q3 for advertisers on both platforms, a return to Q4 2013 levels.

Display Advertising

  • Google Display Network (GDN) share of total Google investment increased from 6% in Q2 to 8% in Q3 for advertisers actively advertising on the GDN.
  • FBX spend was up 30% Y/Y in Q3, while average CPC increased 10%. The larger right hand rail format introduced in Q2 has resulted in increased competition due to fewer ad units and more players in the space.

For additional insights, download the full RKG Digital Marketing Report. The full report provides detailed analyses, with over 50 charts illustrating trends in paid search, SEO, social media, product listing ads, comparison shopping engines, display advertising, attribution and more.

About Merkle

Merkle is a leading data-driven, technology-enabled, global performance marketing agency that specializes in the delivery of unique, personalized customer experiences across platforms and devices. For more than 30 years, Fortune 1000 companies and leading nonprofit organizations have partnered with Merkle to maximize the value of their customer portfolios. The agency’s heritage in data, technology, and analytics forms the foundation for its unmatched skills in understanding consumer insights that drive people-based marketing strategies. Its combined strengths in performance media, customer experience, customer relationship management, loyalty, and enterprise marketing technology drive improved marketing results and competitive advantage. With 6,800 employees, Merkle is headquartered in Columbia, Maryland, with 19 additional offices in the US and 33 offices in Europe and APAC. In 2016, the agency joined the Dentsu Aegis Network. For more information, contact Merkle at 1-877-9-Merkle or visit www.merkleinc.com.

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Erin Hutchinson